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3. A large city is located close to a major seaport. It has been proposed that a new superhighway be built between the city and the seaport, running parallel to the present congested, two-lane highway. A group of consulting engineers has estimated that the new highway will provide the following direct benefits: (1) additional commerce between the city and the seaport, having a value of $50 million per year; (2) future economic growth within the region over a 10-year period, resulting in an increase of $5 million per year in commercial activity, beginning in the second year: (3) a reduction in highway accidents, resulting in a direct savings of approximately $0.8 million per year. On the other hand, the following disadvantages or disbenefits are associated with the new highway: (i) the destruction of valuable farmland that currently contributes $1.3 million per year to the regional economy: (i) a decrease in commercial activity along the present highway, resulting in a loss of $0.7 million per year. Assess the desirability (BCR) of the proposed superhighway, based on a construction cost of $280 million and a yearly maintenance cost of $1.5 million. Assume a life time of 30 years and an interest rate of 7%, compounded annually. a. 2.49, the proposed superhighway is considered to be desirable b. 1.49, the proposed superhighway is considered to be undesirable c. 0.49, the proposed superhighway is considered to be an excellent alternativel

3. A large city is located close to a major seaport. It has been proposed that a new superhighway be built between the city and the seaport, running parallel to the present congested, two-lane highway. A group of consulting engineers has estimated that the new highway will provide the following direct benefits: (1) additional commerce between the city and the seaport, having a value of $50 million per year; (2) future economic growth within the region over a 10-year period, resulting in an increase of $5 million per year in commercial activity, beginning in the second year: (3) a reduction in highway accidents, resulting in a direct savings of approximately $0.8 million per year. On the other hand, the following disadvantages or disbenefits are associated with the new highway: (i) the destruction of valuable farmland that currently contributes $1.3 million per year to the regional economy: (i) a decrease in commercial activity along the present highway, resulting in a loss of $0.7 million per year. Assess the desirability (BCR) of the proposed superhighway, based on a construction cost of $280 million and a yearly maintenance cost of $1.5 million. Assume a life time of 30 years and an interest rate of 7%, compounded annually. a. 2.49, the proposed superhighway is considered to be desirable b. 1.49, the proposed superhighway is considered to be undesirable c. 0.49, the proposed superhighway is considered to be an excellent alternativel

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3. A large city is located close to a major seaport. It has been proposed that a new superhighway be built between the city and the seaport, running parallel to the present congested, two-lane highway. A group of consulting engineers has estimated that the new highway will provide the following direct benefits: (1) additional commerce between the city and the seaport, having a value of $50 million per year; (2) future economic growth within the region over a 10-year period, resulting in an increase of $5 million per year in commercial activity, beginning in the second year: (3) a reduction in highway accidents, resulting in a direct savings of approximately $0.8 million per year. On the other hand, the following disadvantages or disbenefits are associated with the new highway: (i) the destruction of valuable farmland that currently contributes $1.3 million per year to the regional economy: (i) a decrease in commercial activity along the present highway, resulting in a loss of $0.7 million per year. Assess the desirability (BCR) of the proposed superhighway, based on a construction cost of $250 million and a yearly maintenance cost of $1.5 million. Assume a lifetime of 30 years and an interest rate of 7%, compounded annually. a. 2.49, the proposed superhighway is considered to be desirable b. 1.49, the proposed superhighway is considered to be undesirable c. 0.49, the proposed superhighway is considered to be an excellent alternativel 1.49, the proposed superhighway is considered to be undesirable 2.49, the proposed superhighway is considered to be desirable 0.49, the proposed superhighway is considered to be an excellent alternative
Transcribed Image Text:3. A large city is located close to a major seaport. It has been proposed that a new superhighway be built between the city and the seaport, running parallel to the present congested, two-lane highway. A group of consulting engineers has estimated that the new highway will provide the following direct benefits: (1) additional commerce between the city and the seaport, having a value of $50 million per year; (2) future economic growth within the region over a 10-year period, resulting in an increase of $5 million per year in commercial activity, beginning in the second year: (3) a reduction in highway accidents, resulting in a direct savings of approximately $0.8 million per year. On the other hand, the following disadvantages or disbenefits are associated with the new highway: (i) the destruction of valuable farmland that currently contributes $1.3 million per year to the regional economy: (i) a decrease in commercial activity along the present highway, resulting in a loss of $0.7 million per year. Assess the desirability (BCR) of the proposed superhighway, based on a construction cost of $250 million and a yearly maintenance cost of $1.5 million. Assume a lifetime of 30 years and an interest rate of 7%, compounded annually. a. 2.49, the proposed superhighway is considered to be desirable b. 1.49, the proposed superhighway is considered to be undesirable c. 0.49, the proposed superhighway is considered to be an excellent alternativel 1.49, the proposed superhighway is considered to be undesirable 2.49, the proposed superhighway is considered to be desirable 0.49, the proposed superhighway is considered to be an excellent alternative
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