Question

Argentina is considering constructing a bridge across the Rio de la Plata. The cost of the new bridge will be $700 million (today). The bridge will require annual maintenance expenses of $10 million per year at the end of each year. The bridge is estimated to last 50 years. The country estimates the bridge will bring in $70 million in income each year at at the end of each year (for the life of the bridge) via tolls. Argentina has a minimum acceptable rate of return of 8% per year, compounded annually.

A. What is the annual worth of the bridge? (note: enter your answer in millions of dollars and round to two decimal places. If your answer is 3,756,438, then enter your answer as "3.76." Do not include currency signs, commas, or spaces in your answer.)

1C. Is the bridge an acceptable investment?

Group of answer choices

a.) Yes, the bridge is an acceptable investment using AW and IRR.

b.) The bridge is an acceptable investment using AW, but is unacceptable using IRR.

c.)No, the bridge is not an acceptable investment using AW and IRR.

d.) The bridge is an unacceptable investment using AW, but acceptable using IRR.

Answer 1

Cost of the Bridge = too million Annual Maintenance cost= 10 million Estimated life 50 years Annual Income = to million MARR= 8%. (2) what is the A.W. Step-si calculate Het Annual Income Annual income - Annual Maentenance to million - 10 million = 60 million Step 2: Caleware a.w. A.W = - 700 ml. CAIP, 8%,50) + 60 million =-700ml. (0.0817 I + 60 million = 2.81 suillion cost (6) Is is the bridge an acceptable cnvestment ? Ans: (a) YES, the brudge is an acceptable investment using tw & IRR The preofect should be acceptable as ar 8% MARR, the tw is positive.