At what first cost is the project sensitive

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Reference no: EM131527635

A section of interstate highway has benefits in terms of additions to the gross national product (GNP) of $100, 000, 000 for each of the first five years of its existence, $200, 000, 000 for the next five, and $300, 000, 000 for the next ten. Its first cost is $1 billion.

a. If the cost of capital is 15%, should the project be built? Use present worth analysis.

b. At what cost of capital (i) is the project sensitive? (Project sensitive = the i where the project could go or not-go.)

c. At what first cost is the project sensitive if the cost of capital is maintained at 15%?

Reference no: EM131527635

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