The annual benefits associated with construction of an outer belt highway are estimated at $10.5 million by a local planning commission. The initial construction costs will be $400 million, and the project’s useful life is 50 years. Annual maintenance costs are $500,000 with periodic rebuilding costs of $10 million every 10 years. If interest is 2%, the benefit–cost ratio is closest to what value? (a) 0.25 (b) 0.75 (c) 1.11 (d) 1.35?
The annual benefits associated with construction of an outer belt highway are estimated at $10.5 million by a local planning commission. The initial construction costs will be $400 million, and the project’s useful life is 50 years. Annual maintenance costs are $500,000 with periodic rebuilding costs of $10 million every 10 years. If interest is 2%, the benefit–cost ratio is closest to what value? (a) 0.25 (b) 0.75 (c) 1.11 (d) 1.35?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...
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The annual benefits associated with construction of an outer belt highway are estimated at $10.5 million by a local planning commission. The initial construction costs will be $400 million, and the project’s useful life is 50 years. Annual maintenance costs are $500,000 with periodic rebuilding costs of $10 million every 10 years. If interest is 2%, the benefit–cost ratio is closest to what value? (a) 0.25 (b) 0.75 (c) 1.11 (d) 1.35?
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