Question: Tower City aims to construct a new bypass between two main routes that will reduce commuter travel time. The route will cost $15 million and
Tower City aims to construct a new bypass between two main routes that will reduce commuter travel time. The route will cost $15 million and will save 17,500 people $100 per year in petrol costs. The path will be paved. Every year, at a cost of $7,500, the surface must be refinished. The road will be in use for the next 20 years. Determine if Tower City should construct the road. Money has an interest rate of 8%(ε = interest rate) .
e. The simple payback period is on Year Blank 5
f. The discounted payback period is on Year Blank 6
Note: Show final answer in two decimal places and show complete solution
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The simple payback period is the time required to equalize project cost with its benefit This is calculated as Cost Payback Period n uniform annual benefit The cost of this project is 15000000 and uniform annual benefit is 1750000 7500 1742500 Therefore the payback period is 15000000 n 1742500 861 f The discounted payback period considers the discounted cash flow of the project This is cal ... View full answer
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