Calculations and answer npv, irr, and pb

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Reference no: EM133575943

Argentina is considering the construction of a bridge across the "Rio de la Plata" river to connect its northern coast to the southern coast of Uruguay. If this bridge is constructed, it will reduce the travel time from Buenos Aires (Argentina) to Sao Paulo (Brazil) by over 10 hours and has the potential to significantly improve the flow of manufactured goods between the two countries. The new bridge, which will be the longest bridge in the world and span over 50 miles, will cost $705 million. The bridge will require annual maintenance of $10 million for repairs and upgrades and is estimated to last 80 years. It is estimated that 550,000 vehicles will use the bridge during the first year of operation and an additional 50,000 vehicles per year until the 10th year. The annual traffic for the remainder of the life will be 1,000,000 vehicles/year. These data are based on a toll charge of $90/vehicle. The Argentinian government requires a minimum rate of return of 15% (MARR) in order to proceed with the project.

Calculate NPV, IRR, and the payback period. What would you advise the Argentinian government based on the NPV and IRR of this project?
Cashflow Diagram
Calculations and answer NPV, IRR, and PB
Would your recommendation change if Argentina could borrow up to 65% of the cost ($458.25 million) at a 4% interest rate from the World Bank (paid in annual payments over a 50-year period)?
Cashflow Diagram
Calculations and answer NPV, IRR, and PB
What other considerations exist in deciding whether to construct the bridge?

Reference no: EM133575943

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