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Problem 1 6 - 4 7 Internal Rate of Return; Sensitivity Analysis ( Section 1 ) ( LO 1 6 - 1 , 1 6
Problem Internal Rate of Return; Sensitivity Analysis Section LO
In analyzing the runway proposal, the board has decided to use a year time horizon. The county's hurdle rate for capital projects is
percent. The County Board of Representatives believes that if the county conducts a promotional effort costing $ per year,
the proposed long runway will result in substantially greater economic development than was projected originally. However, the board
is uncertain about the actual increase in county tax revenue that will result.
Required:
Suppose the board builds the long runway and conducts the promotional campaign. What would the increase in the county's annual
tax revenue need to be in order for the proposed runway's internal rate of return to equal the county's hurdle rate of percent?
Round your intermediate calculations and final answer to the nearest whole dollar.
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