Determine whether the railroad should build the overpass

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Reference no: EM13222473

Burlington Northern is considering the elimination of a railroad grade crossing by constructing a dual-track overpass. The railroad subcontracts for maintenance of its crossing gates at $11,500 per year. Beginning 4 years from now, however, the costs are expected to increase by $1000 per year into the foreseeable future ( that s, $12,500 4 years from now, $13,500 five years from now, etc.) The overpass will cost $1.4 million (now) to build, but it will eliminate 100% of the auto-train collisions that have cost an average of $250,000 per year. If the railroad uses a 10-year study period and an interest rate of 10% per year, determine whether the railroad should build the overpass.

Reference no: EM13222473

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