What is the city rate of the return

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Reference no: EM131533106

A city is considering investing in speed cameras. It is projected that the yearly operating costs will be $10 million dollars and the yearly revenues $14 million. It has been agreed that the net profit, that is, profit after covering operating expenses, is shared between the city and the operator of the system. The city will receive 75% of the net profit and the operator 25%. (a) If the initial cost of the system is $25 million (paid by the city) and given a 15 year planning horizon, what is the city’s rate of the return? (Do by hand and show all work.) (b) Given the city requires a minimum rate of return of 10%, should they invest in speed cameras?

Reference no: EM131533106

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