A.A road construction project is estimated to have the following expenses:


Initial engineering, right of way acquisition, and construction:              $50,000,000

Major rehabilitation at end of years 15 and 30:                                      $18,000,000 ea.

Annual maintenance and operations:                                                    $ 6,000,000/yr

Lost annual income due to removal of property from tax base:             $ 3,000,000/yr

What is present worth of total costs, given a 45-year analysis period and interest of 3%?

B. A sinking fund for a bridge replacement is established. The cost is estimated at

$20 Million, and the present bridge has a thirty year expected life.

a. What is the annual payment to the sinking fund? Assume interest = 8%.

b. At the end of year 13, what is the balance in the sinking fund?

c. If after year 13, interest changes to 7% for the remaining 17 years, how much must your annual payments be in order to still have $20 million at the end of thirty years?


Q13A.:A fare collection system has the following annual budget:

Labor – One position (24 hrs/ day): 5 people @ $35,000/yr (including benefits)

Maintenance and Operations: $15,000/ yr

Assume there is an automated system which will require:

Initial capital investment with 20-year service life:                $X

Labor:                                                                         $35,000/yr

M&O:                                                                         $20,000/yr

At 4% interest, what value of “X” will make the systems equal in annual cost?

B. How much can a toll bridge authority afford to spend to replace a manned toll booth with an automated device? It costs $40,000 per year to man the toll booth, interest is 7%, and the service life of an automated device is expected to be 15 years.