A toll bridge across the Mississippi River is being considered as a replacement for the current1-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a partof the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation.Investment costs of the structure are estimated to be $17,500,000, and $334,000 per year inoperating and maintenance costs are anticipated. In addition, the bridge must be resurfacedevery fifth year of its 25-year projected life at a cost of $1,200,000 per occurrence (noresurfacing cost in year 25). Revenues generated from the toll are anticipated to be $2,500,000in its first year of operation, with a projected annual rate of increase of 1.75% per year due tothe anticipated annual increase in traffic across the bridge. Assuming zero market (salvage)value for the bridge at the end of 25 years and a MARR of 11% per year, should the toll bridgebe constructed? Also, assume that the initial surfacing of the bridge is included in the initialinvestment costs of the structure.Click the icon to view the interest and annuity table for discrete compounding when theThe benefit-cost ratio of the project with PW isShow TrarN1234567891011121314ed TexSingle PaymentCompoundAmountFactorTo Find FGiven PFIP1.11001.23211.36761.51811.68511.87042.07622.30452.55802.83943.15183.49853.88334.3104Discrete Compounding; /= 11%PresenWorth FactorTo Find PGiven FPIF0.90090.81160.73120.65870.59350.53460.48170.43390.39090.35220.31730.28580.25750.2320(Round to two decimal places.)CompoundAmountFactorTo Find FGiven AFIA1.00002.11003.34214.70976.22787.91299.783311.859414.164016.722019.561422.713226.211630.0949Uniform SeriesPresentWorth FactorTo Find PGiven APIA0.90091.71252.44373.10243.69594.23054.71225.14615.53705.88926.20656.49246.74996.9819SinkingFundFactorTo Find AGiven FAIF1.00000.47390.29920.21230.16060.12640.10220.08430.07060.05980.05110.04400.03820.0332CapitalRecoveryFactorTo Find AGiven PA/P1.11000.58390.40920.32230.27060.23640.21220.19430.18060.16980.16110.15400.14820.1432

B-C ratio is the one of the method of capital budgeting for the long term constructuction projects.…

Answered: A toll bridge across the Mississippi…

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

Section: Chapter Questions

Problem 1PS

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A toll bridge across the Mississippi River is being considered as a replacement for the current I-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B–C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,500,000, and $325,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fifth year of its 30-year projected life at a cost of $1,250,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are anticipated to be $2,500,000 in its first year of operation, with a projected annual rate of increase of 2.25 % per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and aMARR of 10% per year, should the toll bridge be constructed ?
A toll bridge across the Mississippi River is being considered as a replacement for the current I-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,700,000, and $331,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every sixth year of its 30-year projected life at a cost of $1,120,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are anticipated to be $2,600,000 in its first year of operation, with a projected annual rate of increase of 2.25% per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and a MARR of 7% per year, should the toll bridge be constructed? Also, assume that the initial surfacing of…
Atoll bridge across the Mississippi River is being considered as a replacement for the current 1-40 bridge linking Tennessee to Arkansas. Because this bridge if approved, will become a part of the US Interstate Highway system, the B-C ratio method must be applied in the evaluation Investment costs of the structure are estimated to be $17,000,000, and $317.000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fith year of its 25-year projected life at a $1,130.000 per occumence (ho resurfacing cost in year 25) Revenues generated from the toll are anticipated to be $2,200,000 in its first year of operation, with a projected annual rate of increase o 1.75% per year due to the anticipated annual increase in traffe across the bridge. Assuming zero market (salvage) value for the bridge at the end of 25 years and a MARR of 8% per year, should the tall bridge be constructed? Alse, assume that the vial eurtacing of the bridge is…
Two sites are currently under consideration for a bridge over a small river. The north site requires a suspension bridge. The south site has a much shorter span, allowing for a truss bridge, but it would require new road construction.The suspension bridge will cost $500 million with annual inspection andmaintenance costs of $350,000. In addition, the concrete deck would have to be resurfaced every 10 years at a cost of $1,000,000. The truss bridge and approach roads are expected to cost $250 million and have annual maintenance costs of $200,000. This bridge would have to be painted every 3 years at a cost of $400,000. In addition, the bridge would have to be sandblasted every 10 years at a cost of $1,900,000. The cost of purchasing right-of-way is expected to be $20 million for the suspension bridge and $150 million for the truss bridge. Compare the alternatives on the basis of their capitalized cost if the interest rate is 6% per year.
A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty regarding futureuse of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $200,000 and the fourlane bridge, if built initially, will cost $350,000. The future cost of widening a two-lane bridge to four lanes will be an extra $200,000 plus $25,000 for every year that widening is delayed. The MARR used by the highway department is 12% per year. The following estimates have been made of the times at which the four-lane bridge will be required: In view of these estimates, what would you recommend? What difficulty, if any, do you have in interpreting your results? List some advantages and disadvantages of this method of preparing estimates.
The Arkansas Department of Transportation may build a new highway between Texarkana and Fort Smith, currently a distance of 181 miles. Design 1 is a four-lane highway built entirely on the existing route. Design 2 includes a significant rerouting through a mountainous region that would reduce the mileage to 166 miles. Design 3 is a fully access-controlled interstate-quality highway with more rerouting, which would reduce the total mileage to 148 miles.Benefits for this project depend on mileage saved times the number of vehicles, plus the estimated value for the larger number of trips that will occur with the shorter and faster routes. The estimated benefits and costs of the three potential designs are shown in the table. Doing nothing yields no costs and no benefits. Using incremental analysis for the B/C ratio, a planning horizon of 75 years, and a MARR of 6%, which design would you recommend?
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.
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 ofthe traffic bottleneck, has been estimated to be $25,000. Conduct a B–C analysis, using aMARR of 8% and a study period of 25 years, to determine whether the new bridge should be constructed.
GoG is considering two alternative proposals to improve road safety and reduce traffic congestion in city “A”: (a) constructing a new bypass or (b) upgrading existing roadways. The Bypass Proposal will have an initial cost of GHC60 million and annual maintenance costs of GHC2.25 million. It is expected to yield benefits of GHC9.75 million per year. The Upgrading Proposal has an initial cost of GHC7 million, annual maintenance costs of GHC262,500 and annual social benefits of GHC1.14 million. Each project has a life of 30 years. The Bypass Proposal, which would have donor funding component, involves a discount rate of 8% while the Upgrading Proposal, to be funded wholly by government, has a discount rate of 4%. i. Calculatethenetpresentvalueofeachproposalanddetermineifit is economically viable ii. Which of the two proposals is more economically justifiable.
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.a. The interchange is projected to cost $50 million. It will need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $2.5 million. The 1st phase is expected to need the entire 18 months prior to the start of construction and must be completed before construction can begin. The 2nd…
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.a. The interchange is projected to cost $50 million. It will need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $2.5 million. The 1st phase is expected to need the entire 18 months prior to the start of construction and must be completed before construction can begin. The 2nd…
The Government is considering a multi-purpose river valley project in which would involve construction of a dam, a reservoir, a power house, and several irrigation canals. The project would supply water for irrigation, generate electricity, and provide a measure of protection against floods. The following information has been gathered by the project control board. The project will require the following during the construction stage: i) locally produced power equipment costing Ks 200 million; ii) imported power equipment costing $ 10 million; iii) 20,000 tonnes of steel produced locally and made available to the project at Ks 6000 a tonne; iv) 350,000 tonnes of cement produced locally and made available to the project at Ks 800 a tonne; v) other construction materials (sand, bricks, ballast, etc.) costing Ks 100 million; vi) 25 million man-days of unskilled labour for which the project control board has decided to pay a daily wage rate of Ks 10; and vii) skilled labour costing Ks…

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