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Using the current specification, resurfacing a road will cost $1.5M initially, need $120k in annual maintenance and need to be resurfaced every 10 years. A proposed new specification is expected to be more resistant to wear. The resurfacing cost will be $2.1M with 90k in annual maintenance and resurfacing every 15 years.

(a) Develop a choice table for interest rates from 0% to 25%.

(b) if the highway department's interest rate is 6%, which specification is preferred?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91231991

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