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Fresno is considering building a temporary bridge to cut travel time during the three years it will take to build the new permanent “I” Street bridge to West Sacramento. The temporary bridge would be constructed over two years at a cost of $300,000 each year. At the beginning of the fourth year following three years of useful life it would be removed at a cost of $80,000. City cost-benefit analysts predict that the benefits in real dollars would be $200,000 during the first year, $300,000 during the second year, and $400,000 during the third year. Set up the NPV equation for the CBA.
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- Tower City aims to construct a new bypass between two main routes that will reduce commuter travel time. The route will cost $15 million and will save 17,500 people $100 per year in petrol costs. The path will be paved. Every year, at a cost of $7,500, the surface must be refinished. The road will be in use for the next 20 years. Determine if Tower City should construct the road. Money has an interest rate of 8%(ε = interest rate) Note: Show final answer in two decimal places. and complete solution a. The Net Present Worth of this project = $ Blank 1 b. The IRR of this project = Blank 2% c. The ERR of this project = Blank 3% d. Should the city build the bypass road? (type only Yes or No) = Blank 4Tower City aims to construct a new bypass between two main routes that will reduce commuter travel time. The route will cost $15 million and will save 17,500 people $100 per year in petrol costs. The path will be paved. Every year, at a cost of $7,500, the surface must be refinished. The road will be in use for the next 20 years. Determine if Tower City should construct the road. Money has an interest rate of 8%(ε = interest rate) Note: Show final answer in two decimal places and show complete solution e. The simple payback period is on Year Blank 5 f. The discounted payback period is on Year Blank 6The city council is considering a proposal about purchasing a new landfill site. Both the current landfill and new landfill would be usable for the next 10 years. The purchase price is $279,000 and the preparatory work will cost $77,800. It is estimated that the new landfill will cost $51,000 less per year to operate than the current landfill. Assume a hurdle rate of 8%. Ignore tax impacts. Required: Calculate the net present value of the new landfill. Should the city council approve the project on financial grounds? Calculate the internal rate of return for the new landfill. Should the city council approve the project on financial grounds?
- GoG is considering two alternative proposals to improve road safety and reduce traffic congestion in city “A”: (a) constructing a new bypass or (b) upgrading existing roadways. The Bypass Proposal will have an initial cost of GHC60 million and annual maintenance costs of GHC2.25 million. It is expected to yield benefits of GHC9.75 million per year. The Upgrading Proposal has an initial cost of GHC7 million, annual maintenance costs of GHC262,500 and annual social benefits of GHC1.14 million. Each project has a life of 30 years. The Bypass Proposal, which would have donor funding component, involves a discount rate of 8% while the Upgrading Proposal, to be funded wholly by government, has a discount rate of 4%. i. Calculatethenetpresentvalueofeachproposalanddetermineifit is economically viable ii. Which of the two proposals is more economically justifiable.The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 4 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 23 years, what is the present worth of the desalting option revenue at an interest rate of 6% per year? The present worth of the desalting option revenue at an interest rate of 6% per year is determined to be $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?