Question

A toll bridge across the Mississippi River is being considered as a replacement for the current 1-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,200,000, and $332,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fourth year of its 24-year projected life at a cost of $1,110,000 per occurrence (no resurfacing cost in year 24). Revenues generated from the toll are anticipated to be $2,300,000 in its first year of operation, with a projected annual rate of increase of 2.25% per year due to the anticipated annual increase in traffic across the bridge Assuming zero market (salvage) value for the bridge at the end of 24 years and a MARR of 10% per year, should the toll bridge be constructed? Also, assume that the initial surfacing of the bridge is included in the initial investment costs of the structure. 

Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. 

The benefit-cost ratio of the project with PW is _______ . (Round to two decimal places.)

Answer 1