Related questions with answers

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? $$ \begin{matrix} \text{All Costs in \$M} & \text{Suspension Bridge} & \text{Cantilever Bridge}\\ \text{Initial construction} & \text{\$585} & \text{\$470}\\ \text{Land acquisition} & \text{120} & \text{95}\\ \text{Annual O&M} & \text{2} & \text{3}\\ \text{ Annual increase} & \text{4\\%} & \text{0.3}\\ \text{Major maintenance (Year 25)} & \text{185} & \text{210}\\ \text{Salvage cost} & \text{30} & \text{27}\\ \end{matrix} $$

A job can be done with Machine A that costs $12,500 and has annual end-of-year maintenance costs of$5000; its salvage value after 3 years is $2000. Or the job can be done with Machine B, which costs$15,000 and has end-of-year maintenance costs of $4000 and a salvage value of$1500 at the end of 4 years. These investments can be repeated in the future, and your work is expected to continue indefinitely. Use present worth, annual worth, and capitalized cost to compare the machines. The interest rate is 5% year.

Hinson's Homegrown Farms needs a new irrigation system. System one will cost $145,000, have annual maintenance costs of$10,000, and need an overhaul at the end of year six costing $30,000. System two will have first-year maintenance costs of$5000 with increases of $500 each year thereafter. System two would not require an overhaul. Both systems will have no salvage value after 12 years. If Hinson's cost of capital is 4%, using annual worth analysis determine the maximum Hinson should be willing to pay for system two.