ing the reconstruction of a mountain road. The vehicle traffic increases each year; hence the benefits to the motoring public also increase. Based on a traffic count, the benefits are pro- jected as follows:
ing the reconstruction of a mountain road. The vehicle traffic increases each year; hence the benefits to the motoring public also increase. Based on a traffic count, the benefits are pro- jected as follows:
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
Related questions
Question
Please use 2025 instead of 2021 for calculations :)
Transcribed Image Text:8-19 The provincial highway department is analyz-
ing the reconstruction of a mountain road. The
vehicle traffic increases each year; hence the
benefits to the motoring public also increase.
Based on a traffic count, the benefits are pro-
jected as follows:
Year
2016
2017
2018
2019
2020
2021
End-of-Year Benefit
$10,000
12,000
14,000
16,000
18,000
20,000
and so on, increasing
$2,000 per year
The reconstructed pavement will cost
$275,000 when it is installed and will have a
15-year useful life. The construction period
is short; hence a beginning-of-year recon-
struction will result in the listed end-of-year
benefits. Assume a 6% interest rate. The re-
construction, if done at all, must be done no
later than 2021. Should it be done, and if so, in
what year?
N
F
F
I
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