Question
In: Finance
The pavement in a new parking lot is expected to require no maintenance for the first...
The pavement in a new parking lot is expected to require no maintenance for the first two years of its life. At EOY3, the first resurfacing will have to be made costing $50,000. Every two years thereafter, the lot will need resurfacing. However, the cost for each resurfacing is expected to increase by 3% from the time before. The useful life of the parking lot is 26 years and no maintenance occurs in year 26.
a. What is the present worth of the resurfacing costs given a nominal discount rate of 5%.
b. Assume the parking lot costs $8,500,000 to construct. If the parking lot is expected to serve on average 400 vehicles per work day and the daily fee must cover both the amortized cost of the construction and the resurfacing costs, what should the daily per vehicle charge be? Assume that parking fees are charged only on week days (or 260 days per year).
Solutions
Expert Solution
Part a
Present worth of resurfacing costs at discount rate of 5 % is computed below :-
| Year | Maintenance Cost | PVF @ 5% | Present Value |
| a | b | c | d = b*c |
| 1 | $0.00 | 0.952 | $0.000 |
| 2 | $0.00 | 0.907 | $0.000 |
| 3 | $50,000.00 | 0.864 | $43,191.880 |
| 4 | $0.00 | 0.823 | $0.000 |
| 5 | $51,500.00 | 0.784 | $40,351.598 |
| 6 | $0.00 | 0.746 | $0.000 |
| 7 | $53,045.00 | 0.711 | $37,698.091 |
| 8 | $0.00 | 0.677 | $0.000 |
| 9 | $54,636.35 | 0.645 | $35,219.078 |
| 10 | $0.00 | 0.614 | $0.000 |
| 11 | $56,275.44 | 0.585 | $32,903.085 |
| 12 | $0.00 | 0.557 | $0.000 |
| 13 | $57,963.70 | 0.530 | $30,739.390 |
| 14 | $0.00 | 0.505 | $0.000 |
| 15 | $59,702.61 | 0.481 | $28,717.979 |
| 16 | $0.00 | 0.458 | $0.000 |
| 17 | $61,493.69 | 0.436 | $26,829.495 |
| 18 | $0.00 | 0.416 | $0.000 |
| 19 | $63,338.50 | 0.396 | $25,065.197 |
| 20 | $0.00 | 0.377 | $0.000 |
| 21 | $65,238.66 | 0.359 | $23,416.919 |
| 22 | $0.00 | 0.342 | $0.000 |
| 23 | $67,195.82 | 0.326 | $21,877.031 |
| 24 | $0.00 | 0.310 | $0.000 |
| 25 | $69,211.69 | 0.295 | $20,438.405 |
| 26 | $0.00 | 0.281 | $0.000 |
| Present Value of Maintenace/resurfacing cost | $366,448.145 |
Therefore, Present worth of resurfacing costs at discount rate of 5 % is $ 366,448.145
Part b: Determination of Daily per Vehicle charge
Total cost of Parking Lot (for 26 years) = Construction cost + Resurfacing cost
= $ 8,500,000 + $ 366,448.145 = $ 8,866,448.145
Total vehicle-days in 26 years = 400 vehicles per day * 260 days per year * 26 years
= 2,704,000 vehicle days
Daily price to be charged per vehicle = Total cost of Parking Lot / Total vehicle days
= $ 8,866,448.145 / 2,704,000 vehicle days
Daily price to be charged per vehicle = $ 3.279 (approx)
jeff jeffy answered 1 year agoRelated Solutions
66. Shawnee Hospital installs a new parking lot. The paving cost $30,000 and the lights to...
66. Shawnee
Hospital installs a new parking lot. The paving cost $30,000 and
the lights to illuminate the new parking area cost $15,000. Which
of the following statements is true with respect to these
additions?
a. $30,000 should be
debited to the Land account.
b. $15,000 should be
debited to Land Improvements.
c. $45,000 should be
debited to the Land account.
d. $45,000 should be
debited to Land Improvements.
88. A company
purchased factory equipment on April 1, 2008...
When parking a car in a downtown parking lot, drivers pay according to the number of...
When parking a car in a downtown parking lot, drivers pay
according to the number of hours or fraction thereof. The
probability distribution of the number of hours cars are parked has
been estimated as follows:
X
1
2
3
4
5
6
7
8
P(X)
0.224
0.142
0.106
0.08
0.057
0.039
0.033
0.319
A. Mean =
B. Standard Deviation =
The cost of parking is 2.25 dollars per hour. Calculate the mean
and standard deviation of the amount of...
Sharon parked her automobile in a parking lot owned by the Parking Corporation. At the request...
Sharon parked her automobile in a parking lot owned by the
Parking Corporation. At the request of the parking lot attendant,
she left her keys at the attendant's office and received a numbered
ticket as her receipt for the payment of the parking fee. The
ticket had the following words written on the back: “Rental of
space only. Not responsible for loss or damage to car or contents
however caused.” A 50 cm. Square sign on the side of the...
2. When parking a car in a downtown parking lot, drivers pay according to the number...
2. When parking a car in a downtown parking lot, drivers pay
according to the number of hours or parts thereof. The probability
distribution of the number of hours that cars are parked has been
estimated as follows:
X
1
2
3
4
5
6
7 8
P(X)
.24 .18
.13 .10
.07 .04
.04 .20
a. Find the mean and standard deviation of the number of hours
that cars are parked in the lot.
b. If the cost of...
Pavement Design: New pavement design is to be constructed in 2026. The new average daily traffic...
Pavement Design:
New pavement design is to be constructed in 2026. The new
average daily traffic for commercial vehicles on the opening day
will be 1700. Use:
Growth rate = 6%
Subgrade CBR = 3%
Design life = 20 years
Last week, 108 cars received parking violations in the green parking lot. Of these, 27 had...
Last week, 108 cars received parking violations in the green
parking lot. Of these, 27 had unpaid parking tickets from a
previous violation. Assuming that last week was a random sample of
all parking violators, find the width of the 90 percent confidence
interval for the percentage (correct to four decimal places) of
parking violators that have prior unpaid parking tickets.
Two alternatives are under consideration. The first alternative will cost $100,000, require $20,000 in maintenance and...
Two alternatives are under consideration. The first alternative
will cost $100,000, require $20,000 in maintenance and operation
costs each year, and a life cycle of 4 years. The second
alternative will cost $300,000, require $5,000 in maintenance and
operation costs each year and a life of 6 years. Neither option
will have a salvage value.
In order to compute the present worth or future worth, how many
years of each alternative should I use to accurately compare the
two alternatives.
The parking lot of a shopping center is square of sides a, delimited by sills of...
The parking lot of a shopping center is square of sides a,
delimited by sills of height h, and the entrance to the parking lot
is width c. During the last rain it was flooded, and the only
escape route was entrance c. To avoid future flooding, it is
necessary to determine the time t in which the water takes to
evacuate from the enclosure. For the effect, a 1: 100 scale model
is used and it is observed that...
To a parking lot of a commercial plaza on a weekend day, an average of 40...
To a parking lot of a commercial plaza on a weekend day, an
average of 40 vehicles arrive per hour.
a) What is the probability that the time between the arrival of
cars that arrive one after the other (consecutive) is between 6 and
12 minutes?
b) What is the probability that the time between the arrival of
cars arriving one after the other (consecutive) is greater than the
average by one standard deviation?
c) What is the probability that...
The parking lot of a shopping center is square of sides a, delimited by sills of...
The parking lot of a shopping center is square of
sides a, delimited by sills of height h, and the entrance to the
parking lot is width c. During the last rain it was flooded, and
the only escape route was entrance c. To avoid future flooding, it
is necessary to determine the time t in which the water takes to
evacuate from the enclosure. For the effect, a 1: 100 scale model
is used and it is observed that...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- After reviewing the standards of performance, you find that the hotel has determined that the standard...
- What are the four major components of a Mission Statement? 2. Please identify the Project Time...
- Carlsbad Corporation's sales are expected to increase from $5 million in 2019 to $6 million in...
- Create a 350-word memo to management including the following: Describe the use of internal rate of...
- On March 31, 2019, Dorchester Corporation recorded the following factory overhead costs incurred: Factory Manager Salary &n
- Capital Budgeting Methods Project S has a cost of $9,000 and is expected to produce benefits...
- This question contains two parts; be sure to answer both. First, describe the relationship between the...
ADVERTISEMENT