Determine the present worth of project

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City of Kingston is planning on expanding the Kingston Airport on the west end. The initial cost to expand the facility is currently estimated to be $16 million. Based on current labour, equipment and material costs, the annual maintenance costs are approximated at $1.1 million: these are expected to rise at the same rate as general inflation. Moreover, based on its current fee schedule, the City of Kingston expects to generate revenues from parking and user fees totaling $1.8 million per year, which are also expected to increase with the general rate of inflation. The City has negotiated an upgrade of the terminal, which will take place in 20 years, at a cost of $2 million (current). Their current dollar MARR is 5% and they are anticipating inflation to be 1.9% per year. Use a study period of 50 years and express all dollar amounts in millions of dollars.

a) Draw a properly labelled cash flow diagram.

b) Determine the present worth of this project.

Reference no: EM131609668

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