Question 4 The construction cost of a proposed Tollgate on an existing busy road network is...

 

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Question 4 The construction cost of a proposed Tollgate on an existing busy road network is R1.5 million. Table 4 provides estimated operation and maintenance costs as well as expected income for the project. Table 4: Cashflow of proposed Tollgate project Year Operations and Maintenance Cost, R Total Revenue, R 1 240 000 600 000 2 245 000 800 000 3 250 000 900 000 4 255 000 1 100 000 5 260 000 1 200 000 6 265 000 2 000 000 7 270 000 2 200 000 8 275 000 2 300 000 9 280 000 2 400 000 10 285 000 2 500 000 Assuming an interest rate of 12.5% per annum, (i) determine how long it would take to repay the amount invested, (ii) calculate the Rate of Return on Investment. (Hint: Use the method of Discounted Payback Period) [25 marks] Question 4 The construction cost of a proposed Tollgate on an existing busy road network is R1.5 million. Table 4 provides estimated operation and maintenance costs as well as expected income for the project. Table 4: Cashflow of proposed Tollgate project Year Operations and Maintenance Cost, R Total Revenue, R 1 240 000 600 000 2 245 000 800 000 3 250 000 900 000 4 255 000 1 100 000 5 260 000 1 200 000 6 265 000 2 000 000 7 270 000 2 200 000 8 275 000 2 300 000 9 280 000 2 400 000 10 285 000 2 500 000 Assuming an interest rate of 12.5% per annum, (i) determine how long it would take to repay the amount invested, (ii) calculate the Rate of Return on Investment. (Hint: Use the method of Discounted Payback Period) [25 marks]

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