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 15% (ɛ = interest rate). a. The Net Present Worth of this project = $? b. The IRR of this project =? % c. The ERR of this project =? % d. Should the city build the bypass road? (Yes or No) =? e. The simple payback period is on Year =? f. The discounted payback period is on Year =?

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 15% (ɛ = interest rate). a. The Net Present Worth of this project = $? b. The IRR of this project =? % c. The ERR of this project =? % d. Should the city build the bypass road? (Yes or No) =? e. The simple payback period is on Year =? f. The discounted payback period is on Year =?

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 2E

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