2. A city DOT is purchasing a new snow plow for winter road maintenance. The agency...

 

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2. A city DOT is purchasing a new snow plow for winter road maintenance. The agency is considering three alternatives. Given the following information about each alternative, use incremental benefit-cost analysis to determine which option the agency should choose. Assume i = 3%. Initial cost Life Annual operations Total annual benefits Annual maintenance cost increase after year 1 Option A $300,000 10 yrs $45,000 $150,000 $2,500 Option B $400,000 10 yrs $35,000 $200,000 $5,000 Option C $200,000 5 yrs $40,000 $125,000 $5,000 2. A city DOT is purchasing a new snow plow for winter road maintenance. The agency is considering three alternatives. Given the following information about each alternative, use incremental benefit-cost analysis to determine which option the agency should choose. Assume i = 3%. Initial cost Life Annual operations Total annual benefits Annual maintenance cost increase after year 1 Option A $300,000 10 yrs $45,000 $150,000 $2,500 Option B $400,000 10 yrs $35,000 $200,000 $5,000 Option C $200,000 5 yrs $40,000 $125,000 $5,000

Answer rating: 100% (QA)

Plan B is the best as it has the highest NPV value A B C 2 3 4 ... View the full answer