A site on a major river is being evaluated for a new lock and dam for navigation purposes. Two options are considered: (a) single 1200-foot lock or (b) single 1200-foot lock and a single 600-foot lock (two locks, side by side). Benefits and costs of the two options are indicated in the table. Interest rate to be used is 7%, and the planning period is 50 years. Initial cost Annual operating cost Annual benefit Single Lock ($ million) 60.0 1.0 12.0 Double Locks ($ million) 85.0 1.5 16.0 (a-5 pts) Show the cash flow table for both options. (You may show only for the first three years as the same numbers will repeat for the remaining planning period.) (b-10 pts) Solve by the present worth method. (c-10 pts) Solve by the annual cash flow method. (d-10 pts) Solve by the incremental benefit-cost ratio method. (e-5 pts) Check your solutions for (b), (c), and (d). Are they different? Explain.
A site on a major river is being evaluated for a new lock and dam for navigation purposes. Two options are considered: (a) single 1200-foot lock or (b) single 1200-foot lock and a single 600-foot lock (two locks, side by side). Benefits and costs of the two options are indicated in the table. Interest rate to be used is 7%, and the planning period is 50 years. Initial cost Annual operating cost Annual benefit Single Lock ($ million) 60.0 1.0 12.0 Double Locks ($ million) 85.0 1.5 16.0 (a-5 pts) Show the cash flow table for both options. (You may show only for the first three years as the same numbers will repeat for the remaining planning period.) (b-10 pts) Solve by the present worth method. (c-10 pts) Solve by the annual cash flow method. (d-10 pts) Solve by the incremental benefit-cost ratio method. (e-5 pts) Check your solutions for (b), (c), and (d). Are they different? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![A site on a major river is being evaluated for a new lock and dam for navigation purposes.
Two options are considered: (a) single 1200-foot lock or (b) single 1200-foot lock and a
single 600-foot lock (two locks, side by side). Benefits and costs of the two options are
indicated in the table. Interest rate to be used is 7%, and the planning period is 50 years.
Initial cost
Annual operating cost
Annual benefit
Single Lock
($ million)
60.0
1.0
12.0
Double Locks
($ million)
85.0
1.5
16.0
(a-5 pts) Show the cash flow table for both options. (You may show only for the first
three years as the same numbers will repeat for the remaining planning period.)
(b-10 pts) Solve by the present worth method.
(c-10 pts) Solve by the annual cash flow method.
(d-10 pts) Solve by the incremental benefit-cost ratio method.
(e-5 pts) Check your solutions for (b), (c), and (d). Are they different? Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa41e7860-0a25-4d4e-acb6-a653e42bb250%2Fa68dad0d-9bc0-4f40-b505-fa971734c729%2F9s0rpn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A site on a major river is being evaluated for a new lock and dam for navigation purposes.
Two options are considered: (a) single 1200-foot lock or (b) single 1200-foot lock and a
single 600-foot lock (two locks, side by side). Benefits and costs of the two options are
indicated in the table. Interest rate to be used is 7%, and the planning period is 50 years.
Initial cost
Annual operating cost
Annual benefit
Single Lock
($ million)
60.0
1.0
12.0
Double Locks
($ million)
85.0
1.5
16.0
(a-5 pts) Show the cash flow table for both options. (You may show only for the first
three years as the same numbers will repeat for the remaining planning period.)
(b-10 pts) Solve by the present worth method.
(c-10 pts) Solve by the annual cash flow method.
(d-10 pts) Solve by the incremental benefit-cost ratio method.
(e-5 pts) Check your solutions for (b), (c), and (d). Are they different? Explain.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 3 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education