Sacramento is considering building a temporary bridge to cut travel time during the three years it will take to build the new permanent “I” Street bridge to West Sacramento. The temporary bridge would be constructed over two years at a cost of $300,000 each year. At the beginning of the fourth year following three years of useful life it would be removed at a cost of $80,000. City cost-benefit analysts predict that the benefits in real dollars would be $200,000 during the first year, $300,000 during the second year, and $400,000 during the third year. Set up the NPV equation for the CBA.
Sacramento is considering building a temporary bridge to cut travel time during the three years it will take to build the new permanent “I” Street bridge to West Sacramento. The temporary bridge would be constructed over two years at a cost of $300,000 each year. At the beginning of the fourth year following three years of useful life it would be removed at a cost of $80,000. City cost-benefit analysts predict that the benefits in real dollars would be $200,000 during the first year, $300,000 during the second year, and $400,000 during the third year. Set up the NPV equation for the CBA.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Sacramento is considering building a temporary bridge to cut travel time during the three years it will take to build the new permanent “I” Street bridge to West Sacramento. The temporary bridge would be constructed over two years at a cost of $300,000 each year. At the beginning of the fourth year following three years of useful life it would be removed at a cost of $80,000. City cost-benefit analysts predict that the benefits in real dollars would be $200,000 during the first year, $300,000 during the second year, and $400,000 during the third year. Set up the
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