CEE3000_HW4_Fall2007

CEE3000_HW4_Fall2007 - Name CEE 3000 Homework #4 l) A new...

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Unformatted text preview: Name CEE 3000 Homework #4 l) A new landfill is being proposed for your community. You have been asked to determine what tipping fee per ton must be charged over 20 years to cover the equivalent annual costs of the construction and operation of this landfill. It is expected that 10,000 tons of material per year will be placed in the landfill. The cost to construct the landfill is $750,000; the annual operation and maintenance cost is $50,000 per year beginning at EOY l and increasing $5,000 each year thereafter. The nominal interest rate is 7% a) How much should be charged per ton? (3 points) b) Suppose the state environmental protection agency has determined that your design is deficient in that impermeable liners that would minimize leaching into the local water table had not be considered. The agency is requiring that such liners be incorporated into the design at a cost of $5 0,000 (thus increasing the construction cost). The monitoring of potential contamination from the landfill is also expected to cost $5,000 at BOY l and increase 5% each year thereafter to the end of the project life (20 years). Including these new costs, now what is the tipping fee? The interest rate continues to be 7%. (3 points) 2) You work for the Georgia State Road and Tollway Authority (SRTA). You have been asked to determine the required toll per vehicle that would have to be charged on a new toll lane if the cost of the construction and the O&M costs over the life of the project (50 years) is to be paid for solely by toll revenues. This toll lane is to be constructed adjacent to an existing Interstate highway, so there is land to build the lane, and it is expected that only one lane will be necessary. The specifics are as follows. The bond (or loan) that will be necessary to build the lane is $100,000,000 with a nominal market interest rate of 6% compounded monthly. You are expected to set aside enough revenue on a monthly basis to cover a monthly payment back to the bond holders (even though in reality payment wouldn’t occur until the end of the year or even until the end of the bond period). When the toll lane opens, you expect the number of cars to use the lane per month is 300,000, with this volume to increase 500 cars each month until year 30 when the capacity of the toll lane can no longer handle additional cars. After year 30, the volume per month will continue at this capacity level. The interest rate for the cost of money with respect to the toll revenues is also 6%. What should be the toll rate if the SRTA wants to have sufficient revenue over the life of the project to cover the total costs of the toll lane? (5 points) 3. Find the missing value (2 points each) V _ In H 0. Us M _....._._. ‘.Y. 0 ta$4§L1é§q 4) Your community wants to build a new water quality treatment plant, and the mayor wants to know what the capitalization cost is of the proposed facility. Being the resident expert on engineering economy, you have been volunteered to calculate this cost. Given that you are trying to impress the mayor, you want to show him two different ways that this estimate can be calculated. Because the capital cost of the construction of the facility is using federal funds, the mayor does not consider the construction cost to be of interest. However, the federal grant requires the local community to pay operating and maintenance expenses and any rehabilitation costs that may occur over the life of the facility. If you expect the annual O&M costs to be $150,000 and a major rehabilitation of $1,000,000 must occur five years after the first 10 years of operation and every five years thereafter, what is the capitalized cost of O&M and rehabilitation expenses in perpetuity? Nominal interest rate is 8%. a) Calculate your answer by annualizing the 5-year rehabilitation cost and discounting to the present time (3 points) b) Calculate your answer by determining the effective interest rate of the five-year rehabilitation cost and then discounting to the present time. (3 points) 5. A city water department has decided that two alternatives are available to meet the need for an additional 40 millions gallons of water per day. One is to build a dam and reservoir, the other is to undertake a strong program of water conservation/education. The dam and related facilities can be constructed over 3 years at a cost of $15 million in year 1, $6 million in year 2, and $4 million in year 3. Thereafter the operations and maintenance cost is $500,000 per year. The conservation program will cost $5 million the first year, $4 million the second year, and $3 million the third year. Thereafter, $2 million per year will have to be spent to maintain low water use. The planning horizon for both alternatives is 50 years; any costs beyond this length of time are ignored, and an interest rate of 7% is to be used. Which alternative should be undertaken? (5 points) 6. The County School Board has asked for your help in comparing alternative methods of providing education in newly developed suburban areas. For the following three alternatives, recommend the one that will be least costly to the Board. Assume the interest rate is 6% and that the useful life of a school is 20 years. (5 points) Alternative 1: Build a new school Cost for school and equipment: $3,000,000 O&M costs per year for the first three years of operation: $175,000 0&M yearly cost increase beginning after 3 years: 4% per year Salvage value at EOY 20: $400,000 Alternative 2: Build temporary facilities at existing schools to handle additional students Cost for temporary facilities $700,000 0&M costs per year for facilities for first three years $50,000 Additional cost per year thereafter: $10,000 Alternative 3: Bus students to nearby schools where there is capacity Cost the first year: - $400,000 Additional cost per year thereafter: $5 0,000 ...
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CEE3000_HW4_Fall2007 - Name CEE 3000 Homework #4 l) A new...

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