The Metropolitan Transit Authority (MTA) has just opened a new subway line (the Orange Line) in its

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The Metropolitan Transit Authority (MTA) has just opened a new subway line (the Orange Line) in its underground transportation network. The Orange Line had a capital investment of $20 million, expected operating and maintenance expenses are $3 million per year, and the final salvage value at the end of a 40-year life is negligible. If the revenue generated by each customer is $3, how many customers per day will be required before the Orange Line can break even? The MTA’s hurdle (interest) rate is 5% compounded annually. Assume there are 365 days in a year.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Engineering Economy

ISBN: 978-0133439274

16th edition

Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

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