Major highway construction contract

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Reference no: EM131807301

A road building contractor has received a major highway construction contract that will require 50,000 m3 of crushed stone each year for 5 years. The stone can be obtained from a quarry for $5.80/m3. As an alternative, the contractor has decided to try to buy the quarry. He believes that if he owned the quarry, the stone would cost him only $4.30/m3. He thinks he could resell the quarry at the end of 5 years for $200,000. If the contractor uses a 10% interest rate, how much would he be willing to pay for the quarry?

Reference no: EM131807301

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