Evaluate both the alternatives using equivalent uniform annual

worth analysis method at an interest rate of 7% for selecting

economical location.

Route No.1 The initial cost of the bypass is estimated to be $5.7

million. The installation of the tollbooth along the bypass is

estimated to be about $1.3 million. The annual maintenance cost

of the bypass is to be $85,000 each year while the annual

maintenance cost of the tollbooth is to be $65,000 each year. Due

to the construction of the bypass, it is expected to receive

estimated tax savings of $225,000 per year. In addition, LDA has

projected savings of $100,000 each year. Once the tollbooth is

constructed, each car that passes through the toll is expected to

pay a fare of $0.90. The city estimates that there will be a total of

500,000 cars using the bypass each year. Other relevant data is

listed below.

Resurfacing cost (every 7 years) 4% of bypass initial cost

Shoulder Grading/rework 90% of resurfacing cost

Route No.2 The initial cost of the bypass (on route no.2) is

estimated to be $6.5 million. The installation of the tollbooth along

the bypass is estimated to be about $1.5 million. The annual

maintenance cost of the bypass is to be $95,000 each year while

the annual maintenance cost of the tollbooth is to be $78,000 each

year. Due to the construction of the bypass, it is expected to receive

estimated tax savings of $325,000 per year. In addition, LDA has

projected savings of $150,000 each year. Each car that passes

through the toll is expected to pay a fare of $1.30. The city

estimates that there will be a total of 500,000 cars using the bypass

each year. Other relevant data is listed below.

Resurfacing cost (every 7 years) 4.5% of bypass initial cost

Shoulder Grading/rework 90% of resurfacing cost