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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
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
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Please use 2025 instead of 2021 for calculations :)

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
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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