The city of Atlanta is considering adding new buses for its current mass-transit system that links Hartsfield International Airport to major city destinations on a nonstop basis. The total investment package is worth $8 million and is expected to last 10 years with a $750,000 salvage value. The annual operating and maintenance costs for buses would be $2 million. If the system is used for 600,000 trips per year, what would be the fair price to charge per trip? Assume that the city of Atlanta uses 5% interest rate for any city-sponsored projects.(a) $3.50 per trip(b) $4.00 per trip( c) $4.50 per trip(d) $5.00 per trip
The city of Atlanta is considering adding new buses for its current mass-transit system that links Hartsfield International Airport to major city destinations on a nonstop basis. The total investment package is worth $8 million and is expected to last 10 years with a $750,000 salvage value. The annual operating and maintenance costs for buses would be $2 million. If the system is used for 600,000 trips per year, what would be the fair price to charge per trip? Assume that the city of Atlanta uses 5% interest rate for any city-sponsored projects.(a) $3.50 per trip(b) $4.00 per trip( c) $4.50 per trip(d) $5.00 per trip
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 4P
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The city of Atlanta is considering adding new buses for its current mass-transit system that links Hartsfield International Airport to major city destinations on a nonstop basis. The total investment package is worth $8 million and is expected to last 10 years with a $750,000 salvage value. The annual operating and maintenance costs for buses would be $2 million. If the system is used for 600,000 trips per year, what would be the fair price to charge per trip? Assume that the city of Atlanta uses 5% interest rate for any city-sponsored projects.
(a) $3.50 per trip
(b) $4.00 per trip
( c) $4.50 per trip
(d) $5.00 per trip
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