The general city population is set to benefit in travel-time savings from a municipal road project amounting to $80,000. The local government will incur an initial spending of $2,500,000 and an operating and maintenance cost of $30,000 per year. This new road will reduce accidents, representing medical savings of $135,000. Consider a 15- year period and an interest rate of 5%. What is the modified benefit-cost ratio of this project?

The general city population is set to benefit in travel-time savings from a municipal road project amounting to $80,000. The local government will incur an initial spending of $2,500,000 and an operating and maintenance cost of $30,000 per year. This new road will reduce accidents, representing medical savings of $135,000. Consider a 15- year period and an interest rate of 5%. What is the modified benefit-cost ratio of this project?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

The general city population is set to benefit in travel-time savings from a municipal
road project amounting to $80,000. The local government will incur an initial spending
of $2,500,000 and an operating and maintenance cost of $30,000 per year. This new
road will reduce accidents, representing medical savings of $135,000. Consider a 15-
year period and an interest rate of 5%.
What is the modified benefit-cost ratio of this project?

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