The construction cost of the bypass is $20 million, and $500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be $2 million. If the study period is 50 years and the state’s interest rate is 8% per year, should the bypass be constructed? What impact does a social interest rate of 4% per year have on the B–C ratio of the project?
The construction cost of the bypass is $20 million, and $500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be $2 million. If the study period is 50 years and the state’s interest rate is 8% per year, should the bypass be constructed? What impact does a social interest rate of 4% per year have on the B–C ratio of the project?
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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The construction cost of the bypass is $20 million, and $500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be $2 million. If the study period is 50 years and the state’s interest rate is 8% per year, should the bypass be constructed? What impact does a social interest rate of 4% per year have on the B–C ratio of the project?
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