A city is considering extending the runways of its municipal airport so that commercial jets can use the facility. The land necessary for the runway extension is currently farmland that can be purchased for R3.5 million. Construction costs for the runway extension are projected to be R6 million, and the additional annual maintenance costs for the extension are estimated to be R225 000. If the runways are extended, a small terminal will be constructed at a cost of R2.5 million. The annual operating and maintenance costs for the terminal are estimated at R750 000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of R1 million. Annual benefits of the runway extension have been estimated as follows:

Evaluate if the project should be implemented or not.

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R3 250 000 R650 000 R500 000 R500 000 Rental receipts from airlines leasing space at the facility Airport tax charged to passengers Convenience benefit for residents of the city Additional tourism income for the city R3 250 000 R650 000 R500 000 R500 000 Rental receipts from airlines leasing space at the facility Airport tax charged to passengers Convenience benefit for residents of the city Additional tourism income for the city

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Let study period 20 years Discount rate 10 One time costs 6000000 3500000 25000... View the full answer