Hello ,, I have economic question about Engineering Economic Course and I need a

Question

Hello ,, I have economic question about Engineering Economic Course and I need a good expert who can helps me on it . Thanks
roblem 2 District of Columbia Department of Transportation (DDOT is planning to replace an existing bridge. Bridge designs in both steel and concrete are available with the following cost estimates. The steel bridge is estimated to cost S2.000.000 now with a salvage value of $300,000 at the end of 20 years. Maintenance costs of the steel bridge are estimated at $10,000 per year for the first three years and then they increase by S2.000 per year for the next 17 years. (S12.000 the fourth year. S14.000 the fifth year, etc.) The concrete b is estimated to cost SI.800.000 with a negative salvage value of s200,000. (It will cost S200.000 to demolish the structure.) Maintenance costs of the concrete bridge are estimated at S20.000 per year for the full 20 year period. DDOT requests your advice based on annual cash flow analysis which bridge to select. It uses 7% interest rate for planning purposes. (35 Points)

Explanation / Answer

Initial Maintenance Solvage Net Cash Present Year Cashflows Cost Value Flows Value at 7% 0 -2000000 -2000000 -2000000 1 -10000 -10000 -9345.79 2 -10000 -10000 -8734.39 3 -10000 -10000 -8162.98 4 -12000 -12000 -9154.74 5 -14000 -14000 -9981.81 6 -16000 -16000 -10661.5 7 -18000 -18000 -11209.5 8 -20000 -20000 -11640.2 9 -22000 -22000 -11966.5 10 -24000 -24000 -12200.4 11 -26000 -26000 -12352.4 12 -28000 -28000 -12432.3 13 -30000 -30000 -12448.9 14 -32000 -32000 -12410.2 15 -34000 -34000 -12323.2 16 -36000 -36000 -12194.4 17 -38000 -38000 -12029.8 18 -40000 -40000 -11834.6 19 -42000 -42000 -11613.3 20 -44000 300000 256000 66155.26 Total -2146542 Present Value = Cash flow at n year/1.07^n Initial Maintenance Solvage Net Cash Present Year Cashflows Cost Value Flows Value at 7% 0 -1800000 -1800000 -1800000 1 -20000 -20000 -18691.6 2 -20000 -20000 -17468.8 3 -20000 -20000 -16326 4 -20000 -20000 -15257.9 5 -20000 -20000 -14259.7 6 -20000 -20000 -13326.8 7 -20000 -20000 -12455 8 -20000 -20000 -11640.2 9 -20000 -20000 -10878.7 10 -20000 -20000 -10167 11 -20000 -20000 -9501.86 12 -20000 -20000 -8880.24 13 -20000 -20000 -8299.29 14 -20000 -20000 -7756.34 15 -20000 -20000 -7248.92 16 -20000 -20000 -6774.69 17 -20000 -20000 -6331.49 18 -20000 -20000 -5917.28 19 -20000 -20000 -5530.17 20 -20000 -200000 -220000 -56852.2 Total -2063564 Present Value of cost of steel project = 2,146,542 Present Value of cost of concrete project = 2,063,564 Concrete Bridge should be selected for replacement.

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