Select the preferred design for the project

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The Fox River is boarded on the east by Illionis Route 25 and on the west by Illionis Route 31. along one stretch the of river, there is a distance of 16 miles between adjacent crossings. An additional crossing in this area has been proposed, and three alternative bridge designs are under consideration. Two of the designs have 25-yr useful lives, and the third has a useful life of 35 yr. Each bridge must be resurfaced periodically, and the roadbed of each bridge will be replaced at the end of its useful life, at a cost significantly less than initial construction costs. The annual benefits of each design differ on the basis of disruption to normal traffic flow along Routes 25 and 31. Given the information in table above, use the B-C ratio method to determine which bridge design should be selected. Assume that the selected design will be used indefinitely, and use a nominal interest rate of 10% per year. Bridge Design A B C Capital investment $17,000,000 $14,000,000 $12,500,000 Annual maintenance cost* 12,000 17,500 20,000 Resurface (every 5th year)* 40,000 40,000 Resurface (every 7th year)* 40,000 Bridge replacement cost 3,000,000 3,500,000 3,750,000 Annual benefit 2,150,000 1,900,000 1,750,000 Useful life of bridge (yr)** 35 25 25 *Cost not incurred in last year of bridge's useful life. **Applies to roadbed only; Structural portion of bridge has indefinite useful life.

a. Use the conventional benefit-cost-ratio method, with AW as the equivalent worth measure, to select the preferred design for the project.

b. Use the modified B-C ratio method, with PW as the equivalent-worth measure, to select the preferred design for the project

Reference no: EM13191232

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