A highway department must, select one of two pavement repair options for a 10-miie section of a four-lane highway. The analysis period is 8 years, and interest rate is 8%.
| Option 1 | Option 2 |
Initial cost | $5,300,000 | $3,00,000 |
Annual cost | 300,000 | 400,00 |
Lifetime | 8 years | 4 years |
(a) Form the cash flow table for the alternatives and the incremental investment, using standard sign convention.
(b) Using present worth analysis, find the best repair option.
(c) Using annual cash flow analysis, find the best repair option,
(d) Using incremental rate of return analysis, find the best repair option. Use the shortcut of checking at the MARR only.
(e) Using incremental benefit-cost ratio analysis, find the best repair option
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