A new bridge has been proposed across the Missouri river to shorten the travel time to the tourist destinations to the west which will be funded by a joint public venture between several states. To defer construction and maintenance costs, tolls will be collected from motorists using the bridge. The benefits and costs of the project are described in the table below. The bridge will take 5 years of capital investments to build, and it will be operated for 35 years after completion. Conduct a B/C Analysis to determine if the project should be undertaken using a social discount rate of 8%. Show all you work. Benefit or Cost Description Capital Cost in Year O Capital Cost Each Year 1-5 Annual Boost to Private Businesses Once Operational Annual Lost Sales to Private Businesses on Old Routes Once Operational Annual Cost of Environmental Repairs Once Operational Annual Lost Income to Private Hunting Clubs Beginning in Year 1 Annual Tolls Collected by State Once Operational Annual Bridge Maintenance Once Operational Cost in $Millions 100 15 30 5 5 8 12 615 10
A new bridge has been proposed across the Missouri river to shorten the travel time to the tourist destinations to the west which will be funded by a joint public venture between several states. To defer construction and maintenance costs, tolls will be collected from motorists using the bridge. The benefits and costs of the project are described in the table below. The bridge will take 5 years of capital investments to build, and it will be operated for 35 years after completion. Conduct a B/C Analysis to determine if the project should be undertaken using a social discount rate of 8%. Show all you work. Benefit or Cost Description Capital Cost in Year O Capital Cost Each Year 1-5 Annual Boost to Private Businesses Once Operational Annual Lost Sales to Private Businesses on Old Routes Once Operational Annual Cost of Environmental Repairs Once Operational Annual Lost Income to Private Hunting Clubs Beginning in Year 1 Annual Tolls Collected by State Once Operational Annual Bridge Maintenance Once Operational Cost in $Millions 100 15 30 5 5 8 12 615 10
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A new bridge has been proposed across the Missouri river to shorten the travel time
to the tourist destinations to the west which will be funded by a joint public venture between
several states. To defer construction and maintenance costs, tolls will be collected from
motorists using the bridge. The benefits and costs of the project are described in the table
below. The bridge will take 5 years of capital investments to build, and it will be operated
for 35 years after completion. Conduct a B/C Analysis to determine if the project should be
undertaken using a social discount rate of 8%. Show all you work.
Benefit or Cost Description
Capital Cost in Year O
Capital Cost Each Year 1-5
Annual Boost to Private Businesses Once Operational
Annual Lost Sales to Private Businesses on Old Routes Once Operational
Annual Cost of Environmental Repairs Once Operational
Annual Lost Income to Private Hunting Clubs Beginning in Year 1
Annual Tolls Collected by State Once Operational
Annual Bridge Maintenance Once Operational
Cost in $Millions
100
15
30
5
5
82
12
10
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