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Homework answers / question archive / A new 2-lane road is needed in a part of town that is growing
A new 2-lane road is needed in a part of town that is growing. At some point the road will need 4 lanes to handle the anticipated traffic. If the city's optimistic estimate of growth is used, the expansion will be needed in 4 years and has a probability of happening of 40%. For the most likely and pessimistic estimates, the expansion will be needed in 8 and 15 years respectively. The probability of the pessimistic estimate happening is 20%. The expansion will cost $ 4.2 million and the interest rate is 8%. What is the expected PW the expansion will cost?
