A steel pedestrian overpass must either be reinforced or replaced. Reinforcementwould cost $25,000 and would make the overpass adequate for an additional 6years of service. If the overpass is torn down now, the scrap value of the steelwould exceed the removal cost by $15,000. If it is reinforced, it is estimated that itsnet salvage (market) value would be $18,000 at the time it is retired from service.A new pre-stressed concrete overpass would cost $140,000 and would meet theforeseeable requirements of the next 40 years. Such a design would have no scrapvalue or market value. It is estimated that the annual expenses of the reinforceoverpass would exceed those of the concrete overpass by $3,200. Assume thatmoney costs 8% per year, what would you recommend?3.

Given, Interest Rate= 8% Cost= $25,000 Initial Cost= $3,200 Salvage Value= $18,000 Annuity Factor is…

Answered: removal cost by $15,000. If it is…

removal cost by $15,000. If it is reinforced, et) value would be $18,000 at the time it is concrete overpass would cost $140,000 ements of the next 40 years. Such a designv

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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A steel pedestrian overpass must either be reinforced or replaced. Reinforcement would cost $25,000 and would make the overpass adequate for an additional 6 years of service. If the overpass is torn down now, the scrap value of the steel would exceed the removal cost by $15,000. If it is reinforced, it is estimated that its net salvage (market) value would be $18,000 at the time it is retired from service. A new pre- stressed concrete overpass would cost $140,000 and would meet the foreseeable requirements of the next 40 years. Such a design would have no scrap value or market value. It is estimated that the annual expenses of the reinforce overpass would exceed those of the concrete overpass by $3,200. Assume that money costs 8% per year, what would you recommend?
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 site is under consideration for a bridge over a small river. The suspension bridge will cost $500M with annual inspection and maintenance cost of $350,000. In addition, the concrete deck would have to be reconstructed every 10 years at a cost of $1M. The cost of purchasing the right of way is expected to be $20M. find the capitalized cost.
A proposed building may be roofed in either composition roofing (C) or galvanized steel sheet (S). The composition roof costs $56,000 and is replaced every 5 years (assume at the same cost). The steel roof costs $68,000 but the useful life is very long. Neither roof has any salvage value, nor is maintenance needed. If the MARR is 10%, what minimum life must the steel roof have to make it the better alternative? (Report to the nearest whole year; don't bother interpolating.)
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 steel pedestrian overpass must either bereinforced or replaced. Reinforcement would cost$25,000 and would make the overpass adequate for anadditional 6 years of service. If the overpass is torndown now, the scrap value of the steel would exceedthe removal cost by $15,000. If it is reinforced, it isestimated that its net salvage (market) value would be$18,000 at the time it is retired from service. A newpre-stressed concrete overpass would cost $140,000 andwould meet the foreseeable requirements of the next40 years. Such a design would have no net scrap or MV.It is estimated that the annual expenses of the reinforcedoverpass would exceed those of the concrete overpassby $3,200. Assume that money costs the state 8% peryear and that the state pays no taxes. What would yourecommend?
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.
In building a highway, the district engineer is faced with the alternatives of building a four-lane underpass that would take care of all future needs of building a two-lane underpass now and a second two-lane underpass 20 years later. The four-lane underpass would cost 400,000 and has a maintenance cost of 10,000 per year during the 40 years it is expected an underpass will be needed. The two-lane underpass will cost 270,000 each and each would have a maintenance cost of 8,000 per year. if financing costs are 5%, which alternative should be adopted and compute the difference of its equivalent present worth. assume zero salvage value for each alternative at the end of 40 years. Use present worth method.
North City must choose between two new snow-removal machines. The SuperBlower has a $70,000 first cost, a 20-year life, and an $8000 salvage value. At the end of 9 years, it will need a major overhaul costing $19,000. Annual maintenance and operating costs are $9000. The Sno-Mover will cost $50,000, has an expected life of 10 years, and has no salvage value. The annual maintenance and operating costs are expected to be $12,000. Using a 12% interest rate, which machine should be chosen?
A bridge design firm is performing an economic analysis of two mutually exclusive designs forahighway overpass. The steel girder option has an initial cost of $2.13 million, and the concreteoption has an initial cost of $2.41 million. Every 25 years, the steel bridge must be painted at a costof $610,000, and all other maintenance costs are the same for both options. The steel bridge isexpected to last 50 years, and concrete bridge is expected to last 75 years. Both are assumed to beidentically replaced indefinitely. Based on the shortest acceptable analysis period for each option,determine the equivalent uniform annual cost (EUAC) for the best option using an interest rate of8%. Express your answer in $ to the nearest $1,000.
A highway bridge is being considered for replacement. The new bridge would cost $X and would last for 24 years. Annual maintenance costs for the new bridge are estimated to be $24,000. People will be charged a toll of $0.29 per car to use the new bridge. Annual car traffic is estimated at 390,000 cars. The cost of collecting the toll consists of annual salaries for six collectors at $10,000 per collector. The existing bridge can be refurbished for $1,300,000 and would need to be replaced in 24 years. There would be additional refurbishing costs of $75,000 every five years and regular annual maintenance costs of $22,000 for the existing bridge. There would be no toll to use the refurbished bridge. If MARR is 12% per year, what is the maximum acceptable cost (X) of the new bridge?
Two methods of carrying away surface runoff water from a new subdivision are being evaluated:(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 ofredigging and shaping would be required at five-year intervals forever.(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)