The Florida Department of Transportation (FDOT) is trying to decide whether it should “hot patch” a…

The Florida Department of Transportation (FDOT) is trying to decide whether it should “hot patch” a short section of an existing road or “resurface” it. If the “hot patch” method is used, approximately 350 yds of material will be required at a cost of $575lyd (overall cost). Additionally, the shoulders will have to be improved at the same time at a cost of $25,000. T hese improvements will last three (3) years at which time they will have to be redone. The annual cost of routine maintenance on the patched up road would be $12,000. Alternatively, the FDOT can “resurface” the road at a cost of $750,000. This surface will last ten (10) years if the road is maintained at a cost of $10,000 per year beginning four (4) years from now. No matter which alternative is selected, the road will be completely rebuilt in ten (10 years). At an interest rate of 4% per year, which alternative should the FDO select based on a strict economic evaluation only. Draw cash flow diagrams for bo 16 p alternatives and utilize the appropriate economic evaluation method.