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3(b) A City government is planning to build a Light Rail Tunnel in the Central Business District (CBD). The funds have to be borrowed at an interest rate of 12%. For the tunnel to serve its function forever, the following funds will be required. .The construction contractor will require $500 million at beginning of year 1 and another 200 million at the end of year 2 when the construction will end. For routine maintenance, $100,000/year (end of year payment, forever) will be required after the tunnel will be open for service in year 3. $1 million every 10 years for repairs. These repair bills will be paid as end of year payments What is the total present worth of the costs of building, maintaining, and repairing the tunnel?

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w of cot F building 20 mn mn. P of cotf maintainir maintaininj 112 1123 112 112 12 1123 012 66 1-112) (0-12) pw of Cest of Yep curing m n Imn i O ) 12 1 12 Imn 「千 Is 1.12 Imn (1-129) (01リー113 °。rmnTotal PW is $663.1mn if you sum them all

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