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For an investment ending at time T we denote the net cash flow at time...

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Accounting

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For an investment ending at time T we denote the net cash flow at time t by ct and the net rate of cashflow per unit time by (t). The present time is t=0 and time is measured in years. An infrastructure fund considers the construction of a new bridge. It estimates that the project will require an initial outlay of 22.475m= 22,475,000 and a further outlay of 10m after one year ( m= million). There will be an estimated inflow of toll charges of 1m per annum payable continuously for 47 years, beginning at time t=3. Task (following on from the previous part): Assume that the fund may borrow or lend money at 1.0% per annum. Determine whether or not the business venture is profitable, and find the profit or loss when the project ends in 50 years' time. Answer: It is clear that NPV(i) changes sign from at i0, as the outlays take place income is generated. Hence, and the project is . In fact, the profit in 50 years' time is

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