Two roadway designs are under consideration for access to a permanent suspension bridge. Design 1A will cost $3 million to build and $100,000 per year to maintain. Design 1B will cost $3.5 million to build and $40,000 per year to maintain. Both designs are assumed to be permanent. Use an AW-based rate of return equation to determine (a) the breakeven ROR, and (b) which design is preferred at a MARR of 10% per year.
What will be an ideal response?
(a) Breakeven ROR is the ?i* for a perpetual investment
0 = -500,000(?i*) + 60,000
?i* = 60,000/500,000
= 0.12 (12% per year)
(b) ?i* = 12% > MARR = 10%; select design 1B
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