The Catalunia region is prepared to pay €2m to a private company to run a bus service three times a day between Lerida and Tarragona, for a period of 10 years. The initial outlay for the project is estimated at

€0.8m, but annual operating losses (excluding depreciation) will amount to €0.2m. What is the NPV for this investment? If the private company's required rate of return is 10%, will it take up the contract? And if it is 15%?

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