a. A toll bridge across the Mississippi River is being considered as a replacement for the current I-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation. Investment costs of the structure are expected to be $17,500,000, and $325,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fifth year of its 30-year projected life at a cost of $1,250,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are expected to be $2,500,000 in its first year of operation, with a projected annual increase of $1,000,000 per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and a MARR of 10% per year, should the toll bridge be constructed?

b. Refer back to part a- Suppose that the bridge can be redesigned such that it will have a (virtually) infinite life. MARR remains at 10% per year. Revised costs and revenues (benefits) are given as follows: