The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. What is the discounted payback period(in years)? Determine whether this is a good investment using Modified Benefit-Cost a. b. Ratio method with Present Worth(PW). с. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?
The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. What is the discounted payback period(in years)? Determine whether this is a good investment using Modified Benefit-Cost a. b. Ratio method with Present Worth(PW). с. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
Problem 4P
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