A city is considering building a bridge over a set of railroad tracks. Its estimated cost...

A city is considering building a bridge over a set of railroad tracks. Its estimated cost is $200,000. The benefits to the city’s population through reduced congestion and less wear and tear on their automobiles is estimated at 40,000/year. There will be an annual loss of $15,000 to decreased land values to businesses in the area. Yearly O&M is estimated at $5,000 per year. The bridge is expected to have a 40-year life and cost $50,000 to tear down then (negative salvage cost). The city uses the conventional B/C ratio and a 8 % MARR to evaluate its projects. Should the city construct the bridge?

Expert Solution

B/C of project = (AW of benefits - AW of disbenefits)/(AW of initial costs + AW of O&M - AW of salvage)

B/C = (40000-15000)/(200000*(A/P,8%,40) + 5000 + 50000*(A/F,8%,40))

= (40000-15000)/(200000*0.083860 + 5000 + 50000*0.003860)

= 1.14

As B/C is more than 1, this project should be selected

Rahul Sunny answered 2 years ago

A city with 4% unemployment and no inflation is considering building a new stadium for its...

A city with 4% unemployment and no inflation is considering building a new stadium for its professional football team. The team currently plays in an old stadium owned by the city. It would cost city $500M (M for million) to demolish the old stadium and build a new one at the same location, which the city owns. The new stadium would be expected to last for 40 years and the city would finance the costs of the project by borrowing...

A city has built a bridge over a river and it decides to charge a toll...

A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand...

A new bridge is to be constructed over the East River in New York City. Two...

A new bridge is to be constructed over the East River in New York City. Two structural possibilities exist: the support could be in the shape of a parabola or the support could be in the shape of a semi-ellipse. The space between the supports needs to be 1050 feet. The height at the center of the arch needs to be 350 feet. Determine the equation of a parabola with these characteristics. (Hint: Place the vertex of the parabola at...

2. The city administration is considering refurbishing the lighting system of its administration building. After an...

2. The city administration is considering refurbishing the lighting system of its administration building. After an initial investigation, the city procurement office has narrowed down the choices to the following two options: a. Option 1 is an Ergolight system that costs $500,000 to purchase and install. The energy cost for option 1 is $20,000, and its maintenance cost is $2,000. b. Option 2 is a conventional system that costs $100,000 to purchase and install. The energy cost for option 2...

Hardhat has a contract to construct a $5,000,000 bridge at an estimated cost of $4,000,000. The...

Hardhat has a contract to construct a $5,000,000 bridge at an estimated cost of $4,000,000. The contract is to start in 2016 and will be completed in 2018. Below is the data for 2016-18: 2016 2017 2018 Costs to date 1,000,000 2,900,000 4,100,000 Est. costs to complete 3,000,000 1,200,000 - Progress billings during year 900,000 2,400,000 1,700,000 Cash collected during year 750,000 2,250,000 2,000,000 Compute the percentage of...

Vania Magazines started construction of a warehouse building for its own use at an estimated cost...

Vania Magazines started construction of a warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2019, and completed the building on December 31, 2019. During the construction period, Vania has the following debt obligations outstanding. Construction loan—12% interest, payable semiannually, issued December 31, 2018 $2,000,000 Short-term loan—10% interest, payable monthly, and principal payable at maturity, on May 30, 2020 1,400,000 Long-term loan—11% interest, payable on January 1 of each year; principal payable on January...

Vania Magazines started construction of a warehouse building for its own use at an estimated cost...

Vania Magazines started construction of a warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2019, and completed the building on December 31, 2019. During the construction period, Vania has the following debt obligations outstanding. Construction loan—12% interest, payable semiannually, issued December 31, 2018 $2,000,000 Short-term loan—10% interest, payable monthly, and principal payable at maturity, on May 30, 2020 1,400,000 Long-term loan—11% interest, payable on January 1 of each year; principal payable on January...

A firm has estimated its cost of capital as 5% and is considering a project with...

A firm has estimated its cost of capital as 5% and is considering a project with an initial investment of -$265,000. The subsequent cash flows are $65,000; $77,000; $83,000; $91,000; and $96,000. In the final year (year #6), the firm must pay $50,000 to clean up the site. Calculate the project’s MIRR using the three methods discussed in class. Please provide timelines, a description of all of your math, and calculator inputs.

Helmet Head Construction (HHC) is building a bridge for $12 million at a total cost of...

Helmet Head Construction (HHC) is building a bridge for $12 million at a total cost of $10 million over the next three years. The company uses percentage of completion method to recognize revenue. Below is a summary of the contract: 2016 2017 2018 Costs to Date 3,600,000 7,450,000 10,450,000 Estimated Costs to Complete 6,400,000 3,000,000 - Progress Billings During the year 4,000,000 4,000,000 4,000,000 Cash collected during the year 3,250,000 3,250,000 5,500,000 Record the necessary journal entries to account for...

The Abdulla Company purchased a building that cost AED 520,000. The building was estimated to have...

The Abdulla Company purchased a building that cost AED 520,000. The building was estimated to have 20,000 salvage value and 5 years of life. Required: a) (1.5 Marks) Determine depreciation for year 1 and year 2 and record the journal entry using the following methods: Sum of the years digits method Straight line method b) (0.5 Mark) What is the monthly depreciation for each method? Formula: - Sum of the years digits = Step 1 Calculate the Sum...

Question

A city is considering building a bridge over a set of railroad tracks. Its estimated cost...

Solutions

Expert Solution

Related Solutions

A city with 4% unemployment and no inflation is considering building a new stadium for its...

A city has built a bridge over a river and it decides to charge a toll...

A new bridge is to be constructed over the East River in New York City. Two...

2. The city administration is considering refurbishing the lighting system of its administration building. After an...

Hardhat has a contract to construct a $5,000,000 bridge at an estimated cost of $4,000,000. The...

Vania Magazines started construction of a warehouse building for its own use at an estimated cost...

Vania Magazines started construction of a warehouse building for its own use at an estimated cost...

A firm has estimated its cost of capital as 5% and is considering a project with...

Helmet Head Construction (HHC) is building a bridge for $12 million at a total cost of...

The Abdulla Company purchased a building that cost AED 520,000. The building was estimated to have...