6. To implement a congestion tax in a central business district, a government requires $150,000,000 upfront...

 

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6. To implement a congestion tax in a central business district, a government requires $150,000,000 upfront capital expenses for installation of gantry and surveillance equipment. The tax is intended to yield a profit of $40,000,000 per annum after maintenance expenses. At a later time, once the tax has paid for the initial costs, the government intends to spend $60,000,000 per year over four years upgrading the public transit network. At the end of the four-year period the government expects the congestion tax to return a profit of only $30,000,000 per year (additional revenue from the upgraded public transport is here omitted from the evaluation of the tax). How many years is it before the tax generates a break-even amount to offset the cost of the initial capital cost and the transit upgrade? Use a range of planning discount rates (3%, 6% and 10%) to compare the timeframes. 6. To implement a congestion tax in a central business district, a government requires $150,000,000 upfront capital expenses for installation of gantry and surveillance equipment. The tax is intended to yield a profit of $40,000,000 per annum after maintenance expenses. At a later time, once the tax has paid for the initial costs, the government intends to spend $60,000,000 per year over four years upgrading the public transit network. At the end of the four-year period the government expects the congestion tax to return a profit of only $30,000,000 per year (additional revenue from the upgraded public transport is here omitted from the evaluation of the tax). How many years is it before the tax generates a break-even amount to offset the cost of the initial capital cost and the transit upgrade? Use a range of planning discount rates (3%, 6% and 10%) to compare the timeframes.

Answer rating: 100% (QA)

The breakeven point can be calculated using the net present value NPV formula The NPV formula is use... View the full answer