Please solve all the parts.DON\'T ANSWER IF YOU ARE NOT SURE.I will give you goo
ID: 2614743 • Letter: P
Question
Please solve all the parts.DON'T ANSWER IF YOU ARE NOT SURE.I will give you good rating if the answers are right.
A large mudslide caused by heavy rains will cost Sabino County $900,000 per occurrence in lost property tax revenues. In any given year, there is one chance in 100 that a major mudslide will occur A civil engineer has proposed constructing a culvert on a mountain where mudslides are likely. This culvert will reduce the likelihood of a mudslide to near zero. The investment cost would be $48,000, and annual maintenance expenses ould be $2.500 in the first year increasing by 6% per year thereafter. If the life of the culvert is expected to be 20 years and the cost of capital to Sabino County s 7% per year, should the culvert be built? Click the icon to view the interest and annuity table for discrete compounding when he ARR s 6% per year Click the icon to view the interest and annuity table for discrete compounding when the MARR is 7% per year Calculate the EUAC value of a mudslide EUACnothingS(Round to the nearest dollar)Explanation / Answer
Cost Incurred each time mudslide occur = 900000 Current probability of occurance = 1/100 = 0.01 Cost of culvert = 48000 Annual maintainance cost of culvert = (For 1st year) 2500 Increase in Maintainance cost each year = 6% Expected life of culvert = (Years) 20 Cost of capital = 7% (i) EUAC if we do nothing = Cost x Probability = 900000 x 0.01 = 9000 (ii) EUAC if culvery is build = Year Cost of culvert Annual Maintainance cost Net cashflows PV Factor @ 7% PV of net cashflows 0 48000 48000 1 48000 1 2500.00 2500 0.934579 2336.449 2 2650.00 2650 0.873439 2314.613 3 2809.00 2809 0.816298 2292.981 4 2977.54 2977.54 0.762895 2271.551 5 3156.19 3156.192 0.712986 2250.322 6 3345.56 3345.564 0.666342 2229.291 7 3546.30 3546.298 0.62275 2208.456 8 3759.08 3759.076 0.582009 2187.816 9 3984.62 3984.62 0.543934 2167.369 10 4223.70 4223.697 0.508349 2147.114 11 4477.12 4477.119 0.475093 2127.047 12 4745.75 4745.746 0.444012 2107.168 13 5030.49 5030.491 0.414964 2087.475 14 5332.32 5332.321 0.387817 2067.966 15 5652.26 5652.26 0.362446 2048.639 16 5991.40 5991.395 0.338735 2029.493 17 6350.88 6350.879 0.316574 2010.526 18 6731.93 6731.932 0.295864 1991.736 19 7135.85 7135.848 0.276508 1973.121 20 7564.00 7563.999 0.258419 1954.681 90803.81 EUAC = 90803.81/PVAF(7%,20) PVAF(7%,20) = 10.59401 So, EUAC = 90803.81/10.59401 = 8571.238 EUAC under option ii is lower therefore we should build the culvert. Please provide feedback…. Thanks in Advance :-)