Question

Refer to the data given in Problem 16–45. The County Board of Representatives believes that if the county conducts a promotional effort costing $20,000 per year, the proposed long runway will result in substantially greater economic development than was projected originally. However, the board is uncertain about the actual increase in county tax revenue that will result.
In Problem 16–45
Cost of acquiring additional land for runway................................... $ 70,000
Cost of runway construction........................................................... 200,000
Cost of extending perimeter fence.................................................. 29,840
Cost of runway lights..................................................................... 39,600
Annual cost of maintaining new runway....................................... 28,000
Annual incremental revenue from landing fees............................. 40,000

Required:
Suppose the board builds the long runway and conducts the promotional campaign. What would the increase in the county’s annual tax revenue need to be in order for the proposed runway’s internal rate of return to equal the county’s hurdle rate of 12 percent?



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  • CreatedApril 22, 2014
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