maltenance, and need to be resurfaced every 10 ye ars. A proposed new specificat

Question

maltenance, and need to be resurfaced every 10 ye ars. A proposed new specification is expected to be more resistant to wear. The resurfacing cost wi be 0 $2.1M with $90K in annual maintenance and resurfacing every 15 years. a) Develop a choice table for interest rates from 0% atives to 25% from (b) If the highway department's interest rate is 6%, which specification is preferred? RR is n the ow significant is the economic difference between the two specifications? (c) H (d) Research the relationship between road surfac- ing and environmental impact. You may be surprised! rofit ook- ears ond will Multiple Alternatives 12 Haeh altcrmative has a 10 year usefal life and no He salvage value. ned of Initial cost $3000 $6000 $2000 5- at nd Uniform annual benefits 410 980 350 (a) Construct a choice table for interest rates from (b) If the MARR is 8%, which alternative should be 0% to 100%. selected? 8-13 The following three mutually exclusive alternatives have no salvage value after 5 years. Construct a choice table for interest rates from 0% to 100%.

Explanation / Answer

12) Use the fact that PW for any investment = initial cost + annual benefits (P/A, i%, n)

For r = 10%, we have

PW of A = -3000 + 410(P/A, 10%, 10) = -3000 + 410*6.14457 = -483.73

PW of B = -6000 + 980(P/A, 10%, 10) = -6000 + 980*6.14457 = 21.68

PW of C = -2000 +  350(P/A, 10%, 10) = -2000 + 350*6.14457 = 150.60

Use this method to find the PW for 0% to 100%

For i = 8%, we see that PWs are

Hence B should be selected.

Interest rate Present worth A Present worth B Present worth C 0% -3000.0 -6000.00 -2000.00 10% -480.7 21.68 150.60 20% -1281.1 -1891.38 -532.63 30% -1732.5 -2970.29 -917.96 40% -2010.4 -3634.70 -1155.25 50% -2194.2 -4073.99 -1312.14 60% -2322.9 -4381.52 -1421.97 70% -2417.2 -4606.94 -1502.48 80% -2488.9 -4778.43 -1563.73 90% -2545.2 -4912.89 -1611.75 100% -2590.4 -5020.96 -1650.34

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