4. In 1995 a privately-owned toll bridge from the mainland of Scotland to the Isle of...

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4. In 1995 a privately-owned toll bridge from the mainland of Scotland to the Isle of Skye opened. In 2004 the return fare was approximately £11 per vehicle and the bridge was used by about 2,000 vehicles per day. The original contract between the bridge's owners and the Scottish Executive (SE) specified that the ownership of the bridge would be transferred, without charge, to the SE in 2012. However, in 2004 the SE approached the owners and offered to buy the bridge immediately. Assuming that the owners could borrow or lend freely at 5% per year, that the fare and number of vehicles was expected to remain unchanged in the future, that operating costs are £3 million per year, and that risk and uncertainty is ignored, what is the smallest price which would induce the bridge's owners to sell? 4. In 1995 a privately-owned toll bridge from the mainland of Scotland to the Isle of Skye opened. In 2004 the return fare was approximately £11 per vehicle and the bridge was used by about 2,000 vehicles per day. The original contract between the bridge's owners and the Scottish Executive (SE) specified that the ownership of the bridge would be transferred, without charge, to the SE in 2012. However, in 2004 the SE approached the owners and offered to buy the bridge immediately. Assuming that the owners could borrow or lend freely at 5% per year, that the fare and number of vehicles was expected to remain unchanged in the future, that operating costs are £3 million per year, and that risk and uncertainty is ignored, what is the smallest price which would induce the bridge's owners to sell?

Answer rating: 100% (QA)

Daily vehicle 2000 Cost per trip 11 Total revenue of year 200011365 Total reven... View the full answer