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# Answer to Question #105758 in Microeconomics for k

Question #105758
5. A bridge would cost $200 million to build (this cost must be incurred now). After itâ€™s built, starting next year, the bridge will last for 60 years. Each year when the bridge is in use, we expect it to generate$5 million worth of benefits and cost $1 million per year to perform maintenance. The interest rate is 2%. Should we build this bridge? Show your calculations and explain your decision (to build or not to build) 1 Expert's answer 2020-03-18T10:01:30-0400 Building cost =$200 million.

if in 60 years it generates $5 million per year and is maintained for$1 million per year then;

in 60 years the value of bridge will be

(\$200 +( \$5*60) -(\$1*60)) million =$440 million

Therefore the bridge is a productive one and should be build because it add value rather than subtracting on it original cost.

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