Determine the annual worth of the project

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Reference no: EM131585442

The city council of a fast growing city in the west of Canada is planning to construct a new express way to help improve the traffic flow in the city. Construction is to start in 2022 and and is expected to last four years at a cost of $40 million per year. After construction is completed, the regular cost of operation and maintenace is expected at $ 3 million for the first year, increasing by 1% per year thereafter. Major overhauling (major repair) for the express way is needed every 10 years at a cost of $5 million(each time). Consider the present to be the end of 2017/beginning of 2018. The service life of the express way is 40 years and the interest rate is 6%.

a) Draw a cash flow diagram for the new express way project (from present till end of year 2065)

b) Determine the Present Worth of the project.

c) Determine the Annual Worth of the project (Hint: make use of the PW calculated in b).

Reference no: EM131585442

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