Question

In: Economics

In order to improve evacuation routes out of New Orleans in the event of another major...

  1. In order to improve evacuation routes out of New Orleans in the event of another major disaster such as Hurricane Katrina, the Louisiana Department of Transportation (L-DoT) is planning to construct an additional bridge across the Mississippi River.  The department uses an interest rate of 8% and plans a 50-year life for either bridge.  Which design has the better present worth?

All costs in $M

Bridge M

Bridge L

Land acquisition

$220

$195

Annual O & M

2

3

Annual increase

0.04

0.03

Major Maintenance (Year 25)

185

210

Salvage Cost

30

27

Initial Construction

$585

$470

Solutions

Expert Solution

Therefore, the Bridge L is better. Because the NPV is less negative than the Bridge M.

Please don't forget to rate the answer if its helpful, thank you.

Rahul Sunny answered 8 months ago
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