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A transportation agencyis purchasing 350electric truckscarsto replace their maintenance trucks and 100electricSUV’sto replace current petrol vehicles. Eachelectric truck will cost $500,000 and will have a service life of 35 years.Each SUV will cost$150,000and will have a service life of 35 years as well. A transportationagency plans to issue a bond to obtain money for thepurchase ofelectric vehicles. Assuming interest of 5% and a20-year term, what amount must be invested annually in a sinking fund paying 7% to accumulate enough money topay offthe bond after 20 years?
What is the total annual cost of the bond?
Question 3 (30 points):
Demonstrate that for this highway expansion project, the same B/C ratio is obtained using thepresent, future, and annual worth formulations.
•Initial costs of expansion $1,500,000•Annual costs for operating/maintenance 65,000•Annual savings and benefits to travelers 225,000•Scrap value after useful life 300,000•Useful life of investment 30 years•Interest rate 8%
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