Question: The initial cost of a bridge that is expected to be in place forever is $70 million. Maintenance can be done at 1-, 2-, 3-,

The initial cost of a bridge that is expected to be in place forever is $70 million. Maintenance can be done at 1-, 2-, 3-, or 4-year intervals, but the longer the interval between servicing, the higher the cost. The costs of servicing are estimated at $83,000, $91,000, $125,000, and $183,000 for intervals of 1 through 4 years, respectively. What interval should be scheduled for maintenance to minimize the overall equivalent annual cost? The interest rate is 8% per year.

Step by Step Solution

★★★★★

3.42 Rating (180 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Amortization of a 70000000 investment at 8 per year is co... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

217-B-E-M (1389).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

A key falls from a bridge that is 45 m above the water. It falls directly into a model boat, moving with constant velocity that is 12 m from the point of impact when the key is released. What is the...

The real risk-free rate is 3%. Inflation is expected to be 2% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities?...

solve the following question The following measurements were recorded for the drying time, in hours, of a certain brand of latex paint. 3.4 2.5 4.8 2.9 3.6 2.8 3.3 5.6 3.7 2.8 4.4 4.0 5.2 3.0 4.8...

solve these problems The initial cost of a bridge that is expected to be in place forever is $70 million. Maintenance can be done at I-, 2-, 3-, or 4-year intervals, but the longer the interval...

solve these problems:- In our progressive example, B&T Enterprises is considering the replacement of a 2-year-old kiln with a new one to meet emerging market needs. When the current tunnel kiln was...

kindly solve these problems The initial cost of a bridge that is expected to be in place forever is $70 million. Maintenance can be done at I-, 2-, 3-, or 4-year intervals, but the longer the...

solve the question For the data of Exercise 1.4 on page 13, compute both the mean and the variance in "flexibility" for both company A and company B. Does there appear to be a difference in...

The initial cost of a bridge that is expected to be in place forever is $70 million. Maintenance can be done at 1, 2, 3, or 4 year intervals, but the longer the interval between servicing, the higher...

4. 9.9 The initial cost of a bridge that is expected to have a very long useful life is $70 million. Maintenance can be done at 1-, 2-, 3-, or 4- year intervals, but the longer the interval between...

A 5-year bond pays interest annually. Its par value is $1,000 and its coupon rate equals 7%. If the markets required return on the bond is 8 percent, what is the bonds market price?

A single cylinder four-stroke oil engine works on a diesel cycle. The following readings correspond to full load conditions: Area of indicator diagram =3 cm2, Length of the diagram=5 cm, Spring...

Evaluate the integral by reversing the order of integration. 2 0 2 cos ( 5 x 2 ) dx dyy

At the beginning of 2009, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2009 and 2010 was...

Select the best answer. 1. A town signs a ten-year capital lease by which it acquires equipment with a market value of $1million. The lease incorporates an implicit interest rate of 8 percent per...

Martell Mining Companys ore reserves are being depleted, so its sales are falling. Also, its pit is getting deeper each year, so its costs are rising. As a result, the companys earnings and dividends...

What are the ethical implications of murky, complex writing in a document that is supposed to explain how customers can appeal the result of a decision made in the company's favor during a dispute?

On October 1, 2011, the Allegheny Corporation purchased machinery for $115,000. The estimated service life of the machinery is 10 years and the estimated residual value is $5,000. The machine is...

In Exercise 9.27 you estimated the Mankiw, Romer, and Weil (1992) unrestricted regression. Let be the sum of the second, third, and fourth coefficients. (a) Estimate the regression by unrestricted...

The State Highway Department is considering a bypass loop that is expected to save motorists $820,000 per year in gasoline and other automobilerelated expenses. However, local businesses will...

A rural, agriculture-based city that has 17,000 households is required to install treatment systems for the removal of arsenic and other harmful chemicals from its drinking water. The annual cost is...

An Army Corps of Engineers project for improving navigation on the Ohio River will have an initial cost of $6,500,000 and annual maintenance of $130,000. Benefits for barges and paddle wheel touring...

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 5.2%, and sells for $1,105. a. What is the current yield on the bond? (Enter your answer as a percent rounded...

K-Too Everwear Corporation can manufacture mountain climbing shoes for $25.70 per pair in variable raw material costs and $16.95 per pair in variable labor expense. The shoes sell for $126 per pair...

During his speech to the AGM, the Chairman of Banks DIH stated the company was able to achieve an EBIT of 100, depreciation on assets was 40 , interest paid on financing facilities was 20 and final...