A site on a major river is being evaluated for a new lock and dam for navigation purposes.Two options are considered: (a) single 1200-foot lock or (b) single 1200-foot lock and asingle 600-foot lock (two locks, side by side). Benefits and costs of the two options areindicated in the table. Interest rate to be used is 7%, and the planning period is 50 years.Initial costAnnual operating costAnnual benefitSingle Lock($ million)60.01.012.0Double Locks($ million)85.01.516.0(a-5 pts) Show the cash flow table for both options. (You may show only for the firstthree years as the same numbers will repeat for the remaining planning period.)(b-10 pts) Solve by the present worth method.(c-10 pts) Solve by the annual cash flow method.(d-10 pts) Solve by the incremental benefit-cost ratio method.(e-5 pts) Check your solutions for (b), (c), and (d). Are they different? Explain.

Answered: A site on a major river is being…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Army Corps of Engineers wants to construct a dam on a flood-prone river. The estimated construction cost and average annual dollar benefits are listed below. A 6% per year rate applies and dam life is infinite for analysis purposes. (a) Select the one best location using the B/C method. (b) If the sites are now considered independent projects, which sites are acceptable?
A flexible pavement construction project is proposed. The estimated service life is 20 years. The initial cost is estimated at $205,000, and it would have a salvage value of $34,000 at the end of its useful life. The yearly maintenance is estimated at $2,505. What would be the present worth of life-cycle costs? What will be the user cost savings annually to justify the pavement construction ? Use interest rate of 5%.
A proposal is in place to set up a nuclear power plant cooling water filtration project along a river. The benefits (B) are projected to be 10,000 USD per year forever, starting in year 1. The costs (C) are 50,000 USD in year 0 and 50,000 USD at the end of year 2. At 10% annual interest, it this project beneficial? Provide solutions and justifications
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Water supply for an irrigation system can be obtained from a stream in some nearby mountains. Two alternatives are being considered, both of which have essentially infinite lives, provided proper maintenance is performed. The first is a concrete reservioir with a steel pipe system and the second is an earthen dam with a wooden aqueduct. Below are the costs associated with each. Compare the present worths of the two alternatives, using an interest rate of 8%. Which alternative should be chosen {Perform all calculations using 5 significant figures and round any monetary answers to the nearest dollar}? Concrete Reservoir 550,000 2,250 N/A First Cost [dollars] Annual Maintenance Costs [dollars] Replacing the wood portion of the aqueduct each 15 years The cost Concrete Reservoir is (in PW dollars): Earthen Dam 230,000 15,000 120,000 Number The cost of the Earthen Dam plus Aqueduct is (in PW dollars): Number Which alternative should be chosen (enter either 'Reservoir' or 'Dam'?
A new equipment is being considered to replace an old equipment in a facility. The equipment would cost $7,480 and it would require a special maintenance at year 10 of the life expectancy of the equipment, which is of 15 years (also life of the project). The new equipment will generate savings in the order of $1,000 per year. If a discount rate of 6% is used what is the maximum cost of the maintenance at year 10 to make the project to be considered as a feasible option? answer is 4000 but how
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