2006 the State of Indiana in the USA sold a 75-year concession to operate and maintain the East-West Toll Road. Before doing so, it commissioned a consulting report that estimated the value of the concession. Table 1 shows the forecasted cash flow from the toll road.

Table 1 Forecasted cash flows (million $)

	2006-2015	2016-2025	2026-2035	2036-2045	2046-2055	2056-2065	2066-2075	2076-2081
Revenues	1,746.6	2,604.6	3,908.2	5,453.6	7,588.6	10,749.0	14,656.2	11,797.9
Expenditures
General operating	468.8	771.0	1,267.8	2,084.9	3,428.6	5,638.3	9,272.1	8,227.9
Repairs and renovations	577.8	705.2	839.4	1,011.2	1,231.2	1,512.7	1,873.1	1,337.8
Total expenditures	1,046.6	1,476.2	2,107.2	3,096.1	4,659.8	7,151.0	11,145.2	9,565.7
Revenues over expenditures	700.0	1,128.4	1,801.0	2,357.5	2,928.8	3,598.0	3,511.0	2,232.2

The above discount rate was chosen by the consultant of the report on the assumption that it was the interest rate the State of Indiana paid on its bonds. Do you agree with that assumption? Explain your answer

The present value of the concession using a discount rate of 6%. Cash flows are reported in Table 1 for each ten-year block up until 20662075 with the last block as five years (20762081).