The annual benefits associated with construction of an outer belt highway are estimated at $10.5 million by a local planning commission. The initial construction costs will be $400 million, and the project’s useful life is 50 years. Annual maintenance costs are $500,000 with periodic rebuilding costs of $10 million every 10 years. If interest is 2%, the benefit–cost ratio is closest to what value? (a) 0.25 (b) 0.75 (c) 1.11 (d) 1.35?

The annual benefits associated with construction of an outer belt highway are estimated at $10.5 million by a local planning commission. The initial construction costs will be $400 million, and the project’s useful life is 50 years. Annual maintenance costs are $500,000 with periodic rebuilding costs of $10 million every 10 years. If interest is 2%, the benefit–cost ratio is closest to what value? (a) 0.25 (b) 0.75 (c) 1.11 (d) 1.35?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...

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