Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
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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Question
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Answer completely.
- You will get up vote for sure.
Transcribed Image Text:6.
To implement a congestion tax in a central business district, a government requires $150,000,000 upfront capital expenses
for installation of gantry and surveillance equipment. The tax is intended to yield a profit of $40,000,000 per annum after
maintenance expenses. At a later time, once the tax has paid for the initial costs, the government intends to spend
$60,000,000 per year over four years upgrading the public transit network. At the end of the four-year period the
government expects the congestion tax to return a profit of only $30,000,000 per year (additional revenue from the
upgraded public transport is here omitted from the evaluation of the tax). How many years is it before the tax generates a
break-even amount to offset the cost of the initial capital cost and the transit upgrade? Use a range of planning discount
rates (3%, 6% and 10%) to compare the timeframes.
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