Engineering Economy 16th Edition by William Sullivan ,Elin Wicks, Koelling,

Exercise 2

An environmentally friendly 2,800-square-foot green home (99% air tight) costs about 8% more to construct than a same-sized conventional home. Most green homes can save 15% per year on energy expenses to heat and cool the living space. For a $250,000 conventional home with a heating and cooling bill of $3,000 per year, how much would have to be saved in energy expenses per year to justify this home (i.e., B-C ratio greater than or equal to one) The discount rate is 10% per year, and the expected lifeof the home is 30 years. (Problem)
Problem
A toll bridge across the Mississippi River is being considered as a replacement for the current 1-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,500,000, and $325,000 per year in operating and maintenance costs arc anticipated. In addition, the bridge must be resurfaced every fifth year of its 30-year projected life at a cost of $1,250,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are anticipated to be $2,500,000 in its first year of operation, with a projected annual rate of increase of 2.25% per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and a MARR of 10% per year, should the toll bridge be constructed