TOPIC

Economics – Question 8

QUESTION

Constructing a roadway costs $700,000 per lane mile. The estimated life is 15 years. If additional money were spent on extra annual maintenance, the life of the roadway could be extended to 25 years. At a 10% interest rate, what is an appropriate annual amount that should be spent on annual maintenance to extend the life of the roadway?

(A) $7,910

(B) $14,910

(C) $21,910

(D) $28,910

HINT

The appropriate annual amount to be spent on maintenance is that where the equivalent uniform annual cost (EUAC) for the roadway with its life extended to 25 years equals the equivalent uniform annual cost (EUAC) for the roadway with a 15-year life.

ACKNOWLEDGEMENT

This question of the day was provided by the courtesy of  Professor Ram Pendyala of the Arizona State University from the book Fundamentals of Engineering Examination Sample Questions General Engineering.

If you disagree with the way the question is posed or disagree with the correct  answer, please let me know.