Estimate the cost of the underutilized capacity

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Reference no: EM131807091

Bayview's growth is constrained by mountains on one side and the bay on the other. A bridge across the bay is planned, but which plan is best? It can be built with a single deck to meet the needs of the next 20 years, or it can be built with two decks to meet the needs of the next 50 years. The piers can also be built to support two decks, but with only one deck being built now. Building it all now will cost $160M, and leaving the top deck for later will save $40M. Building that top deck later will cost $70M including the cost of traffic disruption. A single-deck bridge will cost $100M now and $115M in 20 years. Deck maintenance is $1.4M per year per deck. Pier maintenance is $1.2M per year per bridge. If the interest rate is 5%, which design should be built? If the two-deck bridge is built immediately, then dedicated lanes for buses, carpools, and bicycles can be added. To economically evaluate this use, estimate the cost of the underutilized capacity for the bridge.

Reference no: EM131807091

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