Answer to Question #74222 in Microeconomics for zulfiqar

Question #74222

A state department of transportation is considering replacement of a bridge at a cost of 200 Million. The life of the new bridge is 30 years, and it is estimated that improved safety and reduced congestion would be valued by bridge users at Rs. 30 Million per year. The Department uses an interest rate of 10 Percent to evaluate capital projects.
(a) Should this proposal be implemented ?
(b) if not, what is the maximum cost of new bridge that could be justified by the benefits?

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