Received a major highway construction contract

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A road building contractor has received a major highway construction contract that will require 50,000 m^3 of crushed stone each year for 5 years. The stone can be obtained from a quarry for $7.80/m^3. As an alternative, the contractor has decided to try to buy the quarry. He believes that if he owed the quarry, the stone would cost him only $6.30/m^3. He thinks he could resell the quarry at the end of 5 years for 200,000. If the contractor uses a 12% interest rate, how much would he be willing to pay for the quarry?

Reference no: EM13700929

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