A government decided to make a 25-year loan on $2,000,000 to a "Toll Road Authority". The first 4 year of the loan period was spent on road construction during which time the government agreed to "capitalize" the interest until the road construction is completed and toll collection has started in the 5th year. $400,000 was expected to be spent at the beginning of the each of the first two years and the rest was also spent equally at the beginning of the 3rd and 4th year. a) What annual payment by the Toll Authority would repay the loan (principal plus interest) over the remaining 21 years at 10% annual compound interest? b) Assume the annual profit (toll collection minus all kinds of cost excluding the loan payment) is $350,000 and the life cycle is 21 year with zero salvage value. What is the IRR of this project? Comment on the economic feasibility when MARR=13%.

A government decided to make a 25-year loan on $2,000,000 to a "Toll Road Authority". The first 4 year of the loan period was spent on road construction during which time the government agreed to "capitalize" the interest until the road construction is completed and toll collection has started in the 5th year. $400,000 was expected to be spent at the beginning of the each of the first two years and the rest was also spent equally at the beginning of the 3rd and 4th year. a) What annual payment by the Toll Authority would repay the loan (principal plus interest) over the remaining 21 years at 10% annual compound interest? b) Assume the annual profit (toll collection minus all kinds of cost excluding the loan payment) is $350,000 and the life cycle is 21 year with zero salvage value. What is the IRR of this project? Comment on the economic feasibility when MARR=13%.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 88P

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