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
Transcribed Image Text:turkish govermnet is now planning to initiate a national budget savings program to construct
"canal istanbul". Auction will be announced just after 5 yeras from now. Consortiums, each made
up of 3 foreinngs and 2 national construction companies willbe allowed to participate in the
auction process. As the construction begins, canal is expected to be complete in 4 years. Currently
the anual construction cost for everthing is 15 billion tl, but these cost are expected to increase by
5 percent anually. after the auction process is complete the winning constrium will require that this
amaount be paid at the start of the year. Public bank X will be responsible for all transactions and
payments. Turkish teasury now has 7.50 billion tl in this bank account that pays 6 percent annually.
Govermnet must save annual deposite in this bank from its regular annual taxes. the govermnet
must make 6 equal annual deposite into this account, the 1st deposite today and the 6th on the
day when construction begins. a) in order for a succesful completion of canal istanbul, how large
must each of the 6 depoiste payments be? b) canal istanbul is expected to earn 10 billion tl per
year after the construction is complete. How much time it will take for the canal to pay itself back?
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