Refer back to Problem 10 7 Suppose that the toll bridge can be redesigned such that it will have a (virtually) infinite life MARR remains at 10 per year Revised costs and revenues (benefits) are given as follows Capital investment $22,500,000 Annual operating and maintenance costs $250,000 Resurfac...

Assumption Initial investment includes initial surfacing of the bridge a PW ...

Refer back to Problem 10-7. Suppose that the toll bridge can be redesigned such that it will

Question:

Refer back to Problem 10-7. Suppose that the toll bridge can be redesigned such that it will have a (virtually) infinite life. remains at 10% per year. Revised costs and revenues (benefits) are given as follows:
Capital investment: $22,500,000
Annual operating and maintenance costs: $250,000
Resurface cost every seventh year: $1,000,000
Structural repair cost, every 20th year: $1,750,000
Revenues (treated as constant-no rate of increase): $3,000,000
a. What is the capitalized worth of the bridge?
b. Determine the B-C ratio of the bridge over an infinite time horizon.
c. Should the initial design (Problem 10-7) or the new design be selected?
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...