A proposed toll bridge is being designed for a life of 50 years. The initial cos

Question

A proposed toll bridge is being designed for a life of 50 years. The initial cost of the bridge is $3,750,000 and annual maintenance costs are estimated to be $30,000. The bridge deck will be resurfaced every 10 years for $900,000 and anti¬corrosion paint will be applied to the steel members every 5 years at a cost of $250,000. The toll for the bridge will be charged by vehicle axles crossing the bridge. It is estimated that 650,000 axles will cross the bridge each year. If the interest rate is 6%. what is the estimated toll per axle.

Explanation / Answer

NPV = 0 =>-3750000-(30000*(((1.06^50)-1)/((1.06^50)*0.06)))-(900000/(1.06^10))-(900000/(1.06^20))-(900000/(1.06^30))-(900000/(1.06^40))-(900000/(1.06^50))-(250000/(1.06^5))-(250000/(1.06^10))-(250000/(1.06^15))-(250000/(1.06^20))-(250000/(1.06^25))-(250000/(1.06^30))-(250000/(1.06^35))-(250000/(1.06^40))-(250000/(1.06^45))-(250000/(1.06^50))+(650000X*(((1.06^50)-1)/((1.06^50)*0.06))) = 0 =>(650000X*(((1.06^50)-1)/((1.06^50)*0.06))) = 5998118.32 =>650000X = 380546.3364 =>X = $ 0.585456.....Estimated toll per axle.

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