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What the benefit-cost ratio of the project

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Question - The general city population is set to benefit annually in travel-time savings from a municipal road project to the tune of 3 million dollars ($3,000,000). The local government will incur spendings in 3 tranches of $30,000,000 each: 1st payment at present; 2nd payment at year 1; and 3rd payment at year 2. Construction concludes at year 2. The annual operating and maintenance cost is expected to be around $2,000,000. This new road will generate tolls of $5,500,000 per year.

Consider an interest rate of 6.5% and a life of 20 years after construction.

a) Draw the cash flow diagram for this project.

b) What the benefit-cost ratio of the project.

c) What the modified benefit-cost of the project.

d) Is the project feasible?

Reference no: EM133017627

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