Question: A city needs a new pedestrian bridge over a local stream. The city uses an interest rate of 5%, and the project life is 30

A city needs a new pedestrian bridge over a local stream. The city uses an interest rate of 5%, and the project life is 30 years. The following data (in millions of dollars) summarizes the bids that were received.

Bid A Bid B
Construction Material Cost 4.20 6.20
Construction Labor Costs 0.60 0.70
Construction Overhead Costs 0.35 0.03
Initial Admin and Legal Costs 0.60 0.01
Annual Operating Costs 0.05 0.075
Annual Revenue from Operation ? 0.40
Other Annual Benefits to the city 0.22 0.25

What would the annual revenue of Bid A have to be for the two projects to be equivalent?

a) 0.10

b) 0.20

c) 0.30

d) 0.40

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