The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. What is the discounted payback period(in years)? Determine whether this is a good investment using Modified Benefit-Cost a. b. Ratio method with Present Worth(PW). с. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?
The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. What is the discounted payback period(in years)? Determine whether this is a good investment using Modified Benefit-Cost a. b. Ratio method with Present Worth(PW). с. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?
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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Transcribed Image Text:The construction of a bypass road needs a capital investment of $200,000 and $10,000
would be required each year for maintenance. The annual benefits to the project have been
estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR
is set at 12%.
What is the discounted payback period(in years)?
*Determine whether this is a good investment using Modified Benefit-Cost
a.
b.
Ratio method with Present Worth(PW).
c.
Using Conventional Benefit-Cost Ratio method with PW but the MARR is
set at 12%, is this project acceptable?
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