A proposed bridge would cost $4 million to build and $180,000 per year in maintenance. The...

 

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A proposed bridge would cost $4 million to build and $180,000 per year in maintenance. The bridge should last 40 years. Benefits to the driving public are estimated to be $900,000 per year. Damages (not paid) to adjacent property owners due to noise are estimated to be $250,000 per year. The interest rate that should be used to evaluate this project is unclear. (a) Calculate the breakeven annual interest rate that results in a B/C ratio of 1. (b) What is the breakeven interest rate if the noise disbenefits are included? Should they be included? A proposed bridge would cost $4 million to build and $180,000 per year in maintenance. The bridge should last 40 years. Benefits to the driving public are estimated to be $900,000 per year. Damages (not paid) to adjacent property owners due to noise are estimated to be $250,000 per year. The interest rate that should be used to evaluate this project is unclear. (a) Calculate the breakeven annual interest rate that results in a B/C ratio of 1. (b) What is the breakeven interest rate if the noise disbenefits are included? Should they be included?

Answer rating: 100% (QA)

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