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 show complete solution e. The simple payback period is on Year Blank 5 f. The discounted payback period is on Year Blank 6
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 show complete solution e. The simple payback period is on Year Blank 5 f. The discounted payback period is on Year Blank 6
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
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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 show complete solution
e. The simple payback period is on Year Blank 5
f. The discounted payback period is on Year Blank 6
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