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March 4th, 2010, 05:13 AM  #1 
Newbie Joined: Mar 2010 Posts: 3 Thanks: 0  Should the twostage or onestage construction be selected?
Problem statement: The State of Georgia wants to build a new railway from Atlanta to Rome, Georgia. A twolane highway can be built now for $300 million and can be enlarged adding two more lanes 25 years from now for an additional $350 million to accommodate future growth. An alternative is to construct the fourlane highway (fullsized) now for $400 million. Both alternatives would provide the needed capacity for the 50year analysis period. Maintenance costs are minimal and can be ignored. At a 6% interest rate, should the twostage or onestage construction be selected? I'm assuming that building the highway now for $400 is cheaper, but I'm not sure how to do the math. 
March 4th, 2010, 08:14 AM  #2 
Global Moderator Joined: Nov 2006 From: UTC 5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms  Re: Should the twostage or onestage construction be selected?
How much would you have to save now to have $350 million in 25 years?


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construction, onestage, selected, twostage 
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