A construction company is studying the economic feasibility of a project that consists of building...
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A construction company is studying the economic feasibility of a project that consists of building a highway stretch connecting two cities. The estimated construction time is two years with the following costs in millions of dollars. Initial cost 50 First year cost 250 Second year cost 400
After construction, the company will operate the highway and collect tolls (fees) from the cars using it for 11 years after construction. The estimated costs and revenues are as follows. Annual Cost ($ million) Annual Revenue ($ million) First three years after construction 3 65 Next five years 3 75 Last five years 4 80
The company uses a MARR equal to 11 % compounded monthly. Is the project attractive based on annual worth?
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