A plan has been put forward for construction of a new train station in Melbourne. Based on Australia standards, the service life of the train station is 50 years. It costs $5 million to purchase the land today and construct the station. The train station is located at the Western suburbs and the land will worth $1 Million after 50 years. The annual maintenance cost is $120,000 each year. In addition, there are 25 staffs working in the station with salary of $60,000 per year each. Some part of the station is rent out for commercial usages, with rental income of $1,200,000 annually. Considering the interest rate is 5%, determine Net Present Value of the project.

A plan has been put forward for construction of a new train station in Melbourne. Based on Australia standards, the service life of the train station is 50 years. It costs $5 million to purchase the land today and construct the station. The train station is located at the Western suburbs and the land will worth $1 Million after 50 years. The annual maintenance cost is $120,000 each year. In addition, there are 25 staffs working in the station with salary of $60,000 per year each. Some part of the station is rent out for commercial usages, with rental income of $1,200,000 annually. Considering the interest rate is 5%, determine Net Present Value of the project.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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