Solutions Manual For
Contemporary Engineering
Economics 7th Edition By Chan
Park
(All Chapters 1-16, 100%
Original Verified, A+ Grade)
All Chapters Arranged Reverse:
16-1
This is The Original Solutions
Manual For 7th Edition, All
other Files in The Market are
Fake/Old/Wrong Edition.
,Contemporary Engineering Economics, 7th ed. ©2023
Chapter 16 Economic Analysis in the Service Sector
Valuation of Benefits and Costs
16.1
(a) • User’s benefits:
- Prevention (or retardation) of highway corrosion: resulting in lower highway
maintenance cost. This lower maintenance cost implies lower users’ taxes
on gasoline, and so forth.
- Prevention of rust on vehicles: resulting in lower repair and maintenance
costs and higher resale value of vehicles.
- Prevention of corrosion to utility lines and damages to water supplies:
resulting in lower utility rates.
- Prevention of damages to vegetation and soil surrounding areas: increasing
land values and agriculture yields.
• Sponsor’s costs:
- Paying a higher tax.
- Unknown environmental damages due to using CMA
(b) The state of Michigan may declare certain sections of highway for
experimental purpose. CMA may be used exclusively for a designated area
and road salts for another area for an extended period time. Then, it
investigates the impact of CMA on vegetation yields, which can be compared
with those of areas from road salt use. The difference in vegetation yields may
be quantified in terms of market value, and so forth.
16.2
Open end question (Not provided)
16.3
Open end question (Not provided)
1
Copyright © 2023 Pearson Education, Inc.
,Contemporary Engineering Economics, 7th ed. ©2023
Benefit-Cost Analysis
16.4
B = $117, 400( P / A, 6%,5)
= $494,535.76
C = $5, 000 + $48,830( P / A, 6%,5)
= $210, 691.49
$494,535.76
BC(6%) =
$210, 691.49
= 2.35 > 1
This project is justifiable based on the benefit-cost analysis.
16.5
B = $250, 000( P / A, 6%, 25) + $50, 000( P / F , 6%, 25)
= $3, 207,500
C = $1, 200, 000 + $100, 000( P / A, 6%, 25)
= $2, 478,340
$3, 207,500
BC(6%) =
$2, 478,340
= 1.29 > 1
16.6
B = $786,000( P / A,8%,15) + $200,000( P / F,8%,15)
= $6,790,799
C ′ = $233,000( P / A,8%,15)
= $1,994,359
I = $2,500,000
Thus, the net savings per dollar invested is:
$6,790,799
BC(8%) = = 1.51
$2,500, 000 + $1,994,359
2
Copyright © 2023 Pearson Education, Inc.
, Contemporary Engineering Economics, 7th ed. ©2023
16.7
(a) BC(i) analysis:
• Design A:
I = $400, 000
C ' = $50, 000( P / A,8%,15) = $427,974
B = $85, 000( P / A,8%,15) = $727,556
• Design B:
I = $300, 000
C ' = $80, 000( P / A,8%,15) = $684, 758
B = $85, 000( P / A,8%,15) = $727,556
• Incremental analysis: Fee collections in the amount of $85,000 will be the
same for both alternatives. Therefore, we will not be able to compute the
BC (i ) ratio. If this happens, we may select the best alternative based on either
the least cost ( I + C ' ) criterion or the incremental PI(i ) criterion. Using the
incremental PI(i ) criterion,
ΔB − ΔC ' 0 − ($427,974 − $684, 758)
PI(8%) A− B = = = 2.57 > 1
ΔI $100, 000
∴Select design A.
(b) Incremental analysis (A – C):
ΔB − ΔC ' 0 − ($427,974 − $556,366)
PI(8%) A−C = = = 2.57 > 1
ΔI $50, 000
∴Select design A.
3
Copyright © 2023 Pearson Education, Inc.
Contemporary Engineering
Economics 7th Edition By Chan
Park
(All Chapters 1-16, 100%
Original Verified, A+ Grade)
All Chapters Arranged Reverse:
16-1
This is The Original Solutions
Manual For 7th Edition, All
other Files in The Market are
Fake/Old/Wrong Edition.
,Contemporary Engineering Economics, 7th ed. ©2023
Chapter 16 Economic Analysis in the Service Sector
Valuation of Benefits and Costs
16.1
(a) • User’s benefits:
- Prevention (or retardation) of highway corrosion: resulting in lower highway
maintenance cost. This lower maintenance cost implies lower users’ taxes
on gasoline, and so forth.
- Prevention of rust on vehicles: resulting in lower repair and maintenance
costs and higher resale value of vehicles.
- Prevention of corrosion to utility lines and damages to water supplies:
resulting in lower utility rates.
- Prevention of damages to vegetation and soil surrounding areas: increasing
land values and agriculture yields.
• Sponsor’s costs:
- Paying a higher tax.
- Unknown environmental damages due to using CMA
(b) The state of Michigan may declare certain sections of highway for
experimental purpose. CMA may be used exclusively for a designated area
and road salts for another area for an extended period time. Then, it
investigates the impact of CMA on vegetation yields, which can be compared
with those of areas from road salt use. The difference in vegetation yields may
be quantified in terms of market value, and so forth.
16.2
Open end question (Not provided)
16.3
Open end question (Not provided)
1
Copyright © 2023 Pearson Education, Inc.
,Contemporary Engineering Economics, 7th ed. ©2023
Benefit-Cost Analysis
16.4
B = $117, 400( P / A, 6%,5)
= $494,535.76
C = $5, 000 + $48,830( P / A, 6%,5)
= $210, 691.49
$494,535.76
BC(6%) =
$210, 691.49
= 2.35 > 1
This project is justifiable based on the benefit-cost analysis.
16.5
B = $250, 000( P / A, 6%, 25) + $50, 000( P / F , 6%, 25)
= $3, 207,500
C = $1, 200, 000 + $100, 000( P / A, 6%, 25)
= $2, 478,340
$3, 207,500
BC(6%) =
$2, 478,340
= 1.29 > 1
16.6
B = $786,000( P / A,8%,15) + $200,000( P / F,8%,15)
= $6,790,799
C ′ = $233,000( P / A,8%,15)
= $1,994,359
I = $2,500,000
Thus, the net savings per dollar invested is:
$6,790,799
BC(8%) = = 1.51
$2,500, 000 + $1,994,359
2
Copyright © 2023 Pearson Education, Inc.
, Contemporary Engineering Economics, 7th ed. ©2023
16.7
(a) BC(i) analysis:
• Design A:
I = $400, 000
C ' = $50, 000( P / A,8%,15) = $427,974
B = $85, 000( P / A,8%,15) = $727,556
• Design B:
I = $300, 000
C ' = $80, 000( P / A,8%,15) = $684, 758
B = $85, 000( P / A,8%,15) = $727,556
• Incremental analysis: Fee collections in the amount of $85,000 will be the
same for both alternatives. Therefore, we will not be able to compute the
BC (i ) ratio. If this happens, we may select the best alternative based on either
the least cost ( I + C ' ) criterion or the incremental PI(i ) criterion. Using the
incremental PI(i ) criterion,
ΔB − ΔC ' 0 − ($427,974 − $684, 758)
PI(8%) A− B = = = 2.57 > 1
ΔI $100, 000
∴Select design A.
(b) Incremental analysis (A – C):
ΔB − ΔC ' 0 − ($427,974 − $556,366)
PI(8%) A−C = = = 2.57 > 1
ΔI $50, 000
∴Select design A.
3
Copyright © 2023 Pearson Education, Inc.
