Bayview\'s growth is constrained by mountains on one side and the bay on the oth

Question

Bayview's growth is constrained by mountains on one side and the bay on the other. A bridge across the bay is planned, but which plan is best? It can be built with a single deck to meet the needs of the next 20 years, or it can be built with two decks to meet the needs of the next 50 years. The piers can also be built to support two decks, but with only one deck begin build now. Building it all now will cost $160M, and leaving the top deck for later will save $40M. Building that top deck later will cost #70 M including the cost of traffic disruption. A single-deck bridge will cost $105M now and $120M in 20 years. Deck maintenance is $1.4M per year per deck. Pier maintenance is $1.2M per year per bridge. If the interest rate is 5%, which design should be built? If the two-deck bridge is built immediately, then dedicated lanes for buses, carpool, and bicycles can be added. To economically evaluate this use, estimate the cost of the underutilized capacity for the bridge.

Explanation / Answer

the cost is more or less equal hence as it is given that immediate construction of two deck bridge can add on more advantages , building two deck bridge right now is reccomended.

Year Disc. Factor Now Later CF DCF CF DCF 0 1.0000 160 160 105 105 1 0.9524 4 3.809524 2.6 2.47619 2 0.9070 4 3.628118 2.6 2.358277 3 0.8638 4 3.45535 2.6 2.245978 4 0.8227 4 3.29081 2.6 2.139026 5 0.7835 4 3.134105 2.6 2.037168 6 0.7462 4 2.984862 2.6 1.94016 7 0.7107 4 2.842725 2.6 1.847771 8 0.6768 4 2.707357 2.6 1.759782 9 0.6446 4 2.578436 2.6 1.675983 10 0.6139 4 2.455653 2.6 1.596174 11 0.5847 4 2.338717 2.6 1.520166 12 0.5568 4 2.22735 2.6 1.447777 13 0.5303 4 2.121285 2.6 1.378836 14 0.5051 4 2.020272 2.6 1.313177 15 0.4810 4 1.924068 2.6 1.250644 16 0.4581 4 1.832446 2.6 1.19109 17 0.4363 4 1.745187 2.6 1.134371 18 0.4155 4 1.662083 2.6 1.080354 19 0.3957 4 1.582936 2.6 1.028908 20 0.3769 4 1.507558 192.6 72.58891 21 0.3589 4 1.435769 4 1.435769 22 0.3418 4 1.367399 4 1.367399 23 0.3256 4 1.302285 4 1.302285 24 0.3101 4 1.240272 4 1.240272 25 0.2953 4 1.181211 4 1.181211 26 0.2812 4 1.124963 4 1.124963 27 0.2678 4 1.071393 4 1.071393 28 0.2551 4 1.020375 4 1.020375 29 0.2429 4 0.971785 4 0.971785 30 0.2314 4 0.92551 4 0.92551 31 0.2204 4 0.881438 4 0.881438 32 0.2099 4 0.839465 4 0.839465 33 0.1999 4 0.79949 4 0.79949 34 0.1904 4 0.761419 4 0.761419 35 0.1813 4 0.725161 4 0.725161 36 0.1727 4 0.69063 4 0.69063 37 0.1644 4 0.657743 4 0.657743 38 0.1566 4 0.626421 4 0.626421 39 0.1491 4 0.596592 4 0.596592 40 0.1420 4 0.568183 4 0.568183 41 0.1353 4 0.541126 4 0.541126 42 0.1288 4 0.515358 4 0.515358 43 0.1227 4 0.490818 4 0.490818 44 0.1169 4 0.467445 4 0.467445 45 0.1113 4 0.445186 4 0.445186 46 0.1060 4 0.423987 4 0.423987 47 0.1009 4 0.403797 4 0.403797 48 0.0961 4 0.384568 4 0.384568 49 0.0916 4 0.366256 4 0.366256 50 0.0872 4 0.348815 4 0.348815 233.0237 232.1856

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