outer belt highway is being planned for The initial cost is estimated to be $170,000,000. Benefits to the public are expected to be $18,000,000 per year. Maintenance costs are estimated at $1,200,000 per year. The beltway will have to be resurfaced every 10 years at a cost of $7,000,000. The road is to be maintained indefinitely. The city's cost of funds is 8%. An a metropolitan area in Tennessee. Based on maintaining the road in perpetuity, find the conventional benefit-cost ratio. Show your calculations in the space below.

outer belt highway is being planned for The initial cost is estimated to be $170,000,000. Benefits to the public are expected to be $18,000,000 per year. Maintenance costs are estimated at $1,200,000 per year. The beltway will have to be resurfaced every 10 years at a cost of $7,000,000. The road is to be maintained indefinitely. The city's cost of funds is 8%. An a metropolitan area in Tennessee. Based on maintaining the road in perpetuity, find the conventional benefit-cost ratio. Show your calculations in the space below.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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A city has developed a plan to provide for future municipal water needs. The plan proposes an aqueduct that passes through 150 meters of tunnel in a nearby mountain. Two alternatives are being considered. The first proposes to build a full-capacity tunnel now for $556 000. The second proposes to build a half capacity tunnel now and a second identical half-capacity tunnel in 20 years. Each of half capacity tunnel costs $402 000. The maintenance cost of the tunnel lining for the full-capacity tunnel is $40 000 every 10 years, and for each half-capacity tunnel it is $32 000 every 10 years. The friction losses in the half-capacity tunnel will be greater than if the full-capacity tunnel were built. The estimated additional pumping costs for each half-capacity tunnel will be $2 000 per year. Using present worth method and a 7% interest rate, which alternative should be selected? Give typing answer with explanation and conclusion
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