A Municipality Has Just Spent $8 Million to Build a Second

A municipality has just spent $8 million to build a second bridge across the city river to handle the increased traffic between two sides of the river. City engineer calculated that the bridge construction would allow a reduction in the travel time for the road users over the 25-year period of the bridge's service life with a present value of $15.5 million. The construction would lead to a decrease in the present value of surrounding property by $6.4 million over the bridge's service life. The present worth of the operation and maintenance of the bridge over its service life is $3.5 million. What is the benefit-cost ratio of the project?

A) 0.87
B) 0.96
C) 1.08
D) 1.32
E) 1.94

Correct Answer:

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