A state highway department is planning the construction of a toll road. Construction cost will...
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A state highway department is planning the construction of a toll road. Construction cost will be $300M (at period=year 0). Annual maintenance is estimated to be $1M every year from year 1 and in perpetuity (forever). In addition, a major resurfacing will have to be carried out at a cost of $10M every 10 years in perpetuity (forever). MARR is 10%.
(a 20 pts) It is estimated that 5M vehicles per year will use the road starting in year 1. Determine what minimum constant toll should be charged to each car to be equivalent to all expenses over an infinite planning horizon.
(b 10 pts) Now assume that the traffic will increase with a growth g=2% per year after year 1. What would be the minimum constant toll? Solve with PW or AW analysis finding the breakeven min toll
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