show all work clearly Thank you A city DOT is purchasing a new snow plow for win
ID: 2795189 • Letter: S
Question
show all work clearly Thank you
A city DOT is purchasing a new snow plow for winter road maintenance. The agency is considering three alternatives. Given the following information about each alternative, use 2. al benefit-cost analysis to determine which option the agency should choose. Assume i = 3%. Initial cost Life Annual operations Total annual benefits Annual maintenance cost increase after year 1 Option A Option B Option C $300,000 $400,000 $200,000 10 yrs $45,000 $150,000 $200,000 $125,000 10 yrs $35,000 5 yrs $40,000 $2,500 $5,000 $5,000Explanation / Answer
Plan B is the best as it has the highest NPV value.
A B C D E F 2 Rate 3% 3 Option A Option B Option C Formula (Ref: Plan A) 4 Initial cost 300,000 400,000 200,000 5 Life 10 10 5 6 Annual ops 45,000 35,000 40,000 7 Total annual benefits 150,000 200,000 125,000 8 Annual maintainence cost increase after year 1 2,500 5,000 5,000 9 10 Year 1 (195,000) (235,000) (115,000) -C4-C6+C7 11 Year 2 102,500 160,000 80,000 C7-C6-C8 12 Year 3 100,000 155,000 75,000 C11-$C$8 13 Year 4 97,500 150,000 70,000 14 Year 5 95,000 145,000 65,000 15 Year 6 92,500 140,000 16 Year 7 90,000 135,000 17 Year 8 87,500 130,000 18 Year 9 85,000 125,000 19 Year 10 82,500 120,000 NPV $513,637 $837,590 $150,656 NPV($C$2, C10:C19)Related Questions
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