Population increase in northern Virginia requires new road constructions and repairs annually from 2022. More public...

 

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Population increase in northern Virginia requires new road constructions and repairs annually from 2022. More public schools will also be needed by 2035. The state of Virginia is considering an option to meet the needs for toll roads and more schools. The option is to build toll roads using a private contractor and building more schools in 2035 which will be financed by revenue from toll roads. Information: . Toll road building costs for the contractor 2022: $50 million 2023: $35 million 2024: $30 million Annual expected number of toll road users/vehicles per day: 20,000 from 2025 at the toll fee of $3. Price elasticity of demand for toll roads is estimated at -0.2. Annual expected cost of new road constructions and repairs is $3 million from 2025. • • Required school investment in 2035 is $45 million (in 2022$). • The state of Virginia and the construction company agreed on a guaranteed profit of $30 million (in 2022$) above the full cost. Use a 5% discount rate and calculate the toll fee that is high enough to pay the construction company the full cost plus $30 million profit, and raise at least $45 million (in 2022$) by 2034 to build more schools in 2035. Show your calculations. Population increase in northern Virginia requires new road constructions and repairs annually from 2022. More public schools will also be needed by 2035. The state of Virginia is considering an option to meet the needs for toll roads and more schools. The option is to build toll roads using a private contractor and building more schools in 2035 which will be financed by revenue from toll roads. Information: . Toll road building costs for the contractor 2022: $50 million 2023: $35 million 2024: $30 million Annual expected number of toll road users/vehicles per day: 20,000 from 2025 at the toll fee of $3. Price elasticity of demand for toll roads is estimated at -0.2. Annual expected cost of new road constructions and repairs is $3 million from 2025. • • Required school investment in 2035 is $45 million (in 2022$). • The state of Virginia and the construction company agreed on a guaranteed profit of $30 million (in 2022$) above the full cost. Use a 5% discount rate and calculate the toll fee that is high enough to pay the construction company the full cost plus $30 million profit, and raise at least $45 million (in 2022$) by 2034 to build more schools in 2035. Show your calculations.

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