Use an incremental analysis

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Reference no: EM131177428

An improvement to the roadwat is desired from a Philmont Scout Ranch to Springer iin northeastern New Mexico. Alternative N (for North) costs $2,400,000 initially and $155,000/year thereafter. Route SA will cost $4,200,000 initially and $88,000/year thereafter. Route SB is the same as SA with wider lanes and shoulders. It costs $5200000 initially with maintenance at $125000/year. USer costs considering time, operation, and safety are $625,000 for N, $410,000 for SA and $310,000 for SB. The salvage value for N, SA, SB after 20 years are 20% of initial cost, respectively. Using a MARR of 7 percent and a 20-year study period, which should be constructed?

a. Use an incremental B/C analysis.

b. Use a B-C analysis.

c. Which route is preffered if 0% interest is used?

Reference no: EM131177428

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