Example: It is proposed to construct a self-financing road tunnel. The criterion is that the toll paid by the vehicles over the life of the project must be sufficient to cover both the initial capital and the other costs which will be incurred over the project's life. Determine a suitable charge on each vehicle passing through the tunnel using the following estimated figures based on 1996 prices. 1. Capital cost Construction cost Land cost Professional fees 2. Annual OMR cost 3. Annual administration cost 4. Replacement cost of autopay ticket machine 5. Estimated annual traffic flow 6. Life of project 7. Required rate of return (real) 8. Estimated inflation rate in the next 20 years $100,000,000 $2,500,000 $5,000,000 $1,000,000 every 5 years 10,000 vehicles per day in the first five years; the growth rate of traffic flow is 30% every 5 years 20 years 12% 10% p.a. (average)
Example: It is proposed to construct a self-financing road tunnel. The criterion is that the toll paid by the vehicles over the life of the project must be sufficient to cover both the initial capital and the other costs which will be incurred over the project's life. Determine a suitable charge on each vehicle passing through the tunnel using the following estimated figures based on 1996 prices. 1. Capital cost Construction cost Land cost Professional fees 2. Annual OMR cost 3. Annual administration cost 4. Replacement cost of autopay ticket machine 5. Estimated annual traffic flow 6. Life of project 7. Required rate of return (real) 8. Estimated inflation rate in the next 20 years $100,000,000 $2,500,000 $5,000,000 $1,000,000 every 5 years 10,000 vehicles per day in the first five years; the growth rate of traffic flow is 30% every 5 years 20 years 12% 10% p.a. (average)
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:Example:
It is proposed to construct a self-financing road tunnel. The criterion is that the toll paid by the vehicles over the life of the
project must be sufficient to cover both the initial capital and the other costs which will be incurred over the project's life.
Determine a suitable charge on each vehicle passing through the tunnel using the following estimated figures based on 1996
prices.
1. Capital cost
Construction cost
Land cost
Professional fees
2. Annual OMR cost
3. Annual administration cost
4. Replacement cost of autopay ticket machine
5. Estimated annual traffic flow
6. Life of project
7. Required rate of return (real)
8. Estimated inflation rate in the next 20 years
$100,000,000
$2,500,000
$5,000,000
$1,000,000 every 5 years
10,000 vehicles per day in the first five years; the growth rate of traffic
flow is 30% every 5 years
20 years
12%
10% p.a. (average)
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