Eor the next 2 no. In building a highway, the district engineer is faced with the alternatives of building a 4-lane underpass that would take care of all future needs of building, or a 2-lane underpass now and a second 2-lane underpass 20 years later. The 4-lane underpass would cost $300,000 and has a maintenance cost of $10,000 per year during the 40 years it is needed. The 2-lane underpass will cost $270,000 each and each would have a maintenance cost of $8,000 per year. Financing costs are 6%. 35) Which alternative is better? A. 2-lane underpass C. Either will do B. 4-lane underpass D. None of these ) What is the Present Worth of the better alternative? C. 450,463 D. -503,169 A. 294,483 B. -302,394
Option A is correct.
A 4-lane underpass is better because it cost is lower and also the maintenance the cost.
Option C is correct.
Present worth = -$300,000 – $10,000 (PVIFA @ I, n)
Present worth = -$300,000 – $10,000 (PVIFA @ 6%, 40)
Present worth = -$300,000 – $10,000 [(1.06^40-1)/9.06*1.06^40)]
Present worth = -$300,000 – $10,000 (15.0463)
Present worth = -$450,463