A Bridge Is to Be Constructed as Part of a 2-Lane

Essay

A bridge is to be constructed as part of a 2-lane highway renovation project. There are two alternatives, one is to construct a 4-lane bridge for $2 M , the other to construct a 2-lane bridge now for $1.5 M and a second 2-lane bridge next to it 10 years for a present value expense of $1.2. A two-lane bridge is considered adequate to handle current traffic volume, although in 10 years volume is expected to increase and require 4 lanes. Looking at a 25 year time horizon, the NPV of maintenance for the 4-lane bridge is $1.8 M; the NPV of maintenance for the initial 2-lane bridge and the later-built 2-lane bridge combined is $1.4 M. Use a B/C analysis to determine which alternative should be adopted. Assume that the "benefit" is the same for both alternatives.