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2) The City of Atlanta is considering adding new buses for its current mass-transit system that links from the Hartsfield International Airport to major city destinations on a non-stop basis. The total capital investment package is worth $12 million and is expected to last 8 years with a $1 million salvage value. The annual operating and maintenance costs for buses would be $2.5 million during the first year, and will grow by 8% annually there-after. If the system is used for 500,000 trips per year, what would be the 'fair' (break-even, zero profit) price to charge per trip? Assume that the City of Atlanta uses a 8% annual interest rate for any city-sponsored projects. Answer: AEC = AER (annual equivalent costs = annual equivalent revenues) 12m(A/P,8%,8) + 2.5m(P/A1,g=8%,i=8%,8)(A/P,8%,8) - 1m(A/F,8%,8) = 500K*$P (where P is price)