Explain why should the toll bridge be constructed

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A toll bridge across Mississipi River is being considered as a replacement for the current I-40 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 applied in the evaluation. Investment cost of the structure are estimated to be $17,500,000, and $325,000 per year in operating and maintenance costs are 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 occurence(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?

Reference no: EM13245773

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