Question

A housing development is being planned for a tract of land near the river. To prevent flood damage to the new homes that will be built on this low-laying land, an earthen embankment can be constructed. The height of the embankment will be determined by an economic analysis of the cost and benefits. The embankment can be expected to last 50 years and will require no maintenance. Whenever the flood water flows over the embankment, $ 250,000 of damage occurs. Based on the data provided, should the embankment be built? If so, to which of the heights above the roadway? A 12 % rate of return is required. Average Frequency That Flood Level Will Exceed Height Above Roadway Once in 3 Years (P = 0.333) Once in 15 Years (P-0.067) Once in 30 Years (P-0.033) Embankment Height Above Roadway (ft) Initial Cost Flood Level Above Roadway (ft) (S) 100,000 6 6 7.5 7.5 200,000 300,000 9 9

Please don’t use excel, show all work

Answer 1

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