Problems 25 through 29 are based on the following information The T Iransportati

Question

Problems 25 through 29 are based on the following information The T Iransportation Authority is planning to build a new bridge. Since only part of the capacity will be d orthene gthe full eap ity now is to build the bridge on is 8%, Estimated costs are as follo Construction Rehabilitation Cost Annual Costs Every 10 years Maintenance Cost Build in two stages: Stage I (Building half-capacity now) Stage 2 (Expand to full-capacity after 20 years) $12 M S1 M S50 K Additional S1.2M Additional $75 K on top of that for on top of that for $14 M Stage 1 S2 M Stage 1 $100 K Build full capacity now $24 M 25. When building this bridge in two stages, the expected annual maintenance cost in year 21 and thereafter is closest to a. $25 K b. $50 K c. $75 K $125 K 13.8

Explanation / Answer

25 Expected annual maintenance cost in year 21 and thereafter If built in two stages Expected maintenance cost 125K ($50K of stage 1 and $75K for stage2)(50+75) Answer. d) 125K 26 Expected rehabilitation cost after 30 years if built in two stages Answer. a) $2.2 M 27 Capitalization cost for building the bridge in two stages Discount rate=MARR=8%=0.08 A Construction cost in year0(Stage1) $12 Million Construction cost in year20(Stage2) $14 Million B Present value(PV) of cost of stage2 3.003675 Million (14/(1+0.08)^20) C PV ofRehabilitation cost after 10 years 0.463193 Million (1/(1.08^10)) D PV ofRehabilitation cost after 20 years 0.257458 Million (1.2/(1.08^20)) E PV of Rehabilitation cost after 30 years 0.119253 Million (1.2/(1.08^30) E=A+B+C+D Capitalized cost in two stages $15.844 Million Answer: a.$15.8 million 28 Capitalization cost for building the bridge in full capacity now A Construction cost in year0 $24 Million B PV ofRehabilitation cost after 10 years 0.926387 Million (2/(1.08^10)) C PV ofRehabilitation cost after 20 years 0.429096 Million (2/(1.08^20)) D PV of Rehabilitation cost after 30 years 0.198755 Million (2/(1.08^30) E PV of Rehabilitation cost after 40 years 0.092062 Million 2/(1.08^40) F=A+B+C+D+E Capitalized cost in two stages $25.646 Million Answer: $26.9million 29 Preferred construction plan a. Build in two stages

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