A project is being considered by the Tennessee Department of Transportation to replace an aging bridge across the Cumberland River on a state highway. The existing two-lane bridge is expensive to maintain and creates a traffic bottleneck because the state highway is four lanes wide on either side of the bridge. The new bridge can be constructed at a cost of $300,000, and estimated annual maintenance costs are $10,000. The existing bridge has annual maintenance costs of $18,500. The annual benefit of the new four-lane bridge to motorists, due to the removal of the traffic bottleneck, has been estimated to be $25,000. Conduct a B-C analysis, using a MARR of 8% and a study period of 25 years, to determine whether the new bridge should be constructed.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A project is being considered by the Tennessee Department of Transportation to
replace an aging bridge across the Cumberland River on a state highway. The
existing two-lane bridge is expensive to maintain and creates a traffic bottleneck
because the state highway is four lanes wide on either side of the bridge. The
new bridge can be constructed at a cost of $300,000, and estimated annual
maintenance costs are $10,000. The existing bridge has annual maintenance costs
of $18,500. The annual benefit of the new four-lane bridge to motorists, due to
the removal of the traffic bottleneck, has been estimated to be $25,000. Conduct a
B-C analysis, using a MARR of 8% and a study period of 25 years, to determine
whether the new bridge should be constructed.
Transcribed Image Text:A project is being considered by the Tennessee Department of Transportation to replace an aging bridge across the Cumberland River on a state highway. The existing two-lane bridge is expensive to maintain and creates a traffic bottleneck because the state highway is four lanes wide on either side of the bridge. The new bridge can be constructed at a cost of $300,000, and estimated annual maintenance costs are $10,000. The existing bridge has annual maintenance costs of $18,500. The annual benefit of the new four-lane bridge to motorists, due to the removal of the traffic bottleneck, has been estimated to be $25,000. Conduct a B-C analysis, using a MARR of 8% and a study period of 25 years, to determine whether the new bridge should be constructed.
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