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1. (40 points) Following the Hurricane Katrina disaster, the Louisiana Department of Transportation (LDOT) considered new ways to increase evacuation routes. After researching, the top suggestion was to build an additional bridge to cross the Mississippi River. LDOT has reviewed 2 design plans with project costs for building this bridge; a suspension bridge or a cantilever bridge. Costs for each alternative are provided below. If the LDOT can get an interest rate of 6%, determine which bridge is more cost effective over a 50-year service life and justify your selection (Explain). Costs (in Millions) Suspension Bridge Cantilever Bridge Land Acquisition 120 Initial Construction First Year Maintenance Costs Annual Maintenance Increase Major Maintenance (25 Year) 210 Demolition/Deconstruction Costs 585 2 2% 185 30 95 470 3 0.1 2. (30 points) A chemical company is reviewing 2 options for a process line to produce a new polymer. The process line is expected to be viable for 20 years, at which point the company may change their lines again. Assuming either line will produce the required amount and quality of the polymer, determine which line should be selected. Costs for each line are provided below and the company is able to secure a 6% interest rate. Determine the Net Present Worth and Equivalent Uniform Annual Worth of each process for 20 years. Line Name Initial Costs Annual Operating Costs Salvage Value Life $4,000,000 10 years $3,000,000 $6,000,000 20 years $5,000,000 Alpha S18,000,000 Beta $25,000,000 3. (30 points) A new alloy can be produced by Process A, which will cost $200,000 to implement. This same process will have operating costs of $10,000 per quarter, a salvage value of $25,000 after its 2- year service life, and annual profits of $425,000. Process B, a secondary method for producing the alloy, has a $250,000 implementation cost and will cost $15,000 to operate each quarter. Process B has a salvage value of $40,000 after a 4-year service life and earns $480,000 per year. If interest is 6% per quarter compounded quarterly, determine the present worth of both processes over an 8-year production life and select the best option. 1. (40 points) Following the Hurricane Katrina disaster, the Louisiana Department of Transportation (LDOT) considered new ways to increase evacuation routes. After researching, the top suggestion was to build an additional bridge to cross the Mississippi River. LDOT has reviewed 2 design plans with project costs for building this bridge; a suspension bridge or a cantilever bridge. Costs for each alternative are provided below. If the LDOT can get an interest rate of 6%, determine which bridge is more cost effective over a 50-year service life and justify your selection (Explain). Costs (in Millions) Suspension Bridge Cantilever Bridge Land Acquisition 120 Initial Construction First Year Maintenance Costs Annual Maintenance Increase Major Maintenance (25 Year) 210 Demolition/Deconstruction Costs 585 2 2% 185 30 95 470 3 0.1 2. (30 points) A chemical company is reviewing 2 options for a process line to produce a new polymer. The process line is expected to be viable for 20 years, at which point the company may change their lines again. Assuming either line will produce the required amount and quality of the polymer, determine which line should be selected. Costs for each line are provided below and the company is able to secure a 6% interest rate. Determine the Net Present Worth and Equivalent Uniform Annual Worth of each process for 20 years. Line Name Initial Costs Annual Operating Costs Salvage Value Life $4,000,000 10 years $3,000,000 $6,000,000 20 years $5,000,000 Alpha S18,000,000 Beta $25,000,000 3. (30 points) A new alloy can be produced by Process A, which will cost $200,000 to implement. This same process will have operating costs of $10,000 per quarter, a salvage value of $25,000 after its 2- year service life, and annual profits of $425,000. Process B, a secondary method for producing the alloy, has a $250,000 implementation cost and will cost $15,000 to operate each quarter. Process B has a salvage value of $40,000 after a 4-year service life and earns $480,000 per year. If interest is 6% per quarter compounded quarterly, determine the present worth of both processes over an 8-year production life and select the best option

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