Question

A new highway is to be opened to traffic this week which has cost the city $5million to build. Considering a life cycle of 10 years, the annual maintenance will cost $20,000. The city plans to transfer the ownership of the road to the state government in 2030 for an agreed upon price of $8,000,000. The stakeholders have agreed to purchase smart equipment valued $400,000 in 2023 in order to transform the highway to a tollway in 2023 which will return a revenue of $32,000 annually. (Interest rate is 3%)

Draw the cash flow chart and calculate the Net Present Value

Answer 1