Required information [The following information applies to the questions displayed below.] Washington County's Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board's decision appear below. $ 87,000 295,000 10,724 48,000 24,000 65,000 Cost of acquiring additional land for runway Cost of runway const ruction Cost of extending perimeter fence Cost of runway lights Annual cost of maintaining Annual incremental revenue from landing fees new runway In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $195,000. The old snowplow could be sold now for $19,500. The new, larger plow will cost $18,000 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway, and the major jet service it will bring to the county, will increase economic activity in the community. The board projects that the increased economic activity will result in $124,000 per year in additional tax revenue for the county. In analyzing the runway proposal, the board has decided to use a 10-year time horizon. The county's hurdle rate for capital projects is 22 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the initial cost of the investment in the long runway. 2. Compute the annual net cost or benefit from the runway. 3-a. Determine the IRR on the proposed long runway. (Round your answer to the nearest whole percent.) 3-b. Should it be built considering IRR? Table I Period 4% 6% 8% 10% 12% 14% 20% Future Value of $1.00(1 1 1,040 1.060 1,080 1.100 1.120 1.140 1.200 2 1.082 1.124 1.166 1.210 1.254 1.300 1.440 3 1.125 1.191 1.260 1.331 1.405 1.482 1.728 4 1.170 1.263 1.361 1.464 1.574 1,689 2.074 5 1.217 1.338 1.469 1.611 1.762 1.925 2.488 6 1.265 1.419 1.587 1.772 1.974 2,195 2.986 7 1.316 1.504 1.714 1.949 2.211 2.502 3.583 1.851 8 1.369 1.594 2.144 2.476 2,853 4,300 1.423 1.690 1.999 2.359 2.773 3.252 5.160 10 1.480 1.791 2.159 2.594 3.106 3.707 6.192 11 1.540 1.898 2.332 2.853 3.479 4.226 7.430 12 1,601 2.012 2.518 3.139 3.896 4.818 8,916 13 1.665 2.133 2,720 3.452 4.364 5.492 10.699 14 1.732 2.261 2.937 3,798 4,887 6.261 12,839 15 1.801 2.397 3.172 4,177 5.474 7.138 15.407 3.207 20 2.191 4,661 6.728 9,646 13.743 38.338 30 3.243 5,744 10.063 17.450 29.960 50.950 237.380 45.260 40 4.801 10.286 21.725 93.051 188.880 1,469.800 Table II 8% Period 4% 6% 10% 12% 14% 20% Future Value of a Series of 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 $1.00 Cash Flows (Ordinary Annuity) (1 2 2,040 2,060 2.080 2.100 2.120 2.140 2.220 3.122 3 3.184 3.246 3.310 3.374 3.440 3.640 4 4.247 4,375 4.506 4.641 4.779 4.921 5.368 5.416 5.637 5.867 6.105 6.353 6.610 7.442 6.633 6.975 7,336 7,716 8.115 8.536 9.930 7 7.898 8.394 8.923 9.487 10.089 10.730 12.916 9.214 9.898 10.637 11.436 12.300 13.233 16.499 9 10.583 11.491 12.488 13.580 14.776 16.085 20.799 10 12.006 13.181 14.487 15.938 17,549 19.337 25.959 11 13.486 14.972 16,646 18.531 20.655 23.045 32.150 12 15.026 16.870 18.977 21.385 24.133 27.271 39,580 32.089 13 16.627 18.882 21.495 24.523 28.029 48.497 37.581 14 18.292 21.015 24.215 27.976 32.393 59.196 27.152 15 20,024 23.276 31,773 37.280 43,842 72.035 20 29.778 36.778 45.762 57.276 75.052 91.025 186.690 113.283 30 56.085 79,058 164.496 241.330 356.790 1,181.900 40 95.026 259.057 442,597 1,342.000 154,762 767.090 7,343.900 Table III Present Value of $1.00 1 (1 10 % 28% 4% Period 6% 8% 12% 14% 16% 18% 20% 22% 24% 26% 30% 32% 1 .962 943 .926 .909 .893 .877 .862 847 833 820 .806 794 781 769 758 769 694 2 .925 890 857 826 .797 743 718 672 .650 .630 .610 .592 .574 889 840 794 751 712 .675 641 ,609 579 551 .524 500 477 455 435 4 855 .792 735 .683 636 592 552 .516 482 451 423 397 373 350 329 5 822 747 681 .621 .567 .519 .476 437 402 370 341 315 291 269 250 6 790 705 630 .564 .507 456 .410 370 335 303 275 250 227 207 189 7 760 665 583 .513 452 400 354 314 279 249 .222 198 178 .159 .143 731 627 .139 8 540 467 .404 351 305 266 233 204 .179 157 .123 .108 703 592 500 424 361 308 263 225 194 .167 144 125 108 .094 .082 10 676 558 463 386 322 270 227 191 .162 137 .116 .099 085 073 .062 350 11 .650 527 429 287 237 195 .162 .135 .112 .094 .079 066 056 .047 12 625 497 397 319 257 .208 168 137 .112 092 .076 ,062 052 043 .036 13 .601 469 368 .290 229 .182 145 116 093 075 .061 .050 040 .033 027 14 .577 442 340 263 205 160 .125 ,099 078 062 .049 039 032 025 021 15 555 417 315 239 .183 .140 108 .084 065 051 040 .031 025 020 .016 20 456 312 215 .149 .104 .073 .051 .037 026 .019 ,014 .010 007 005 ,004 004 .001 30 308 174 .099 .057 .033 020 012 .007 003 .002 .001 40 208 097 ,046 022 .011 005 003 ,001 001 Table IV Present Value of Serles of $1.00 Cash Flows 1 1 r (1r 8% Period 4% 6% 10% 12% 14% 16% 18% 20% 22% 24% 25% 26% 28% 30% 1 0.962 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.800 0.794 0.781 0.769 2 1.886 1.833 1,783 1.736 1.690 1.647 1.605 1.566 1,528 1.492 1.457 1.440 1.424 1.392 1.361 3 2.775 2.673 2,577 2.487 2,402 2,322 2.246 2.174 2.106 2.042 1,981 1.952 1,923 1.868 1.816 3.170 4 3,630 3.465 3.312 3.037 2.914 2.798 2.690 2,589 2.494 2.404 2.362 2.320 2.241 2.166 3.79 3.274 6 5 4.452 4.212 3.605 433 2,99 864 2.7 2.689 2,63 .532 5.242 4.917 4.623 4.355 4,111 3.889 3.685 3.498 3.326 3.167 3.020 2.951 2,885 2.759 2.643 7 6.002 5.582 5.206 4.868 4,564 4,288 4,039 3.812 3.605 3.416 3.242 3.161 3.083 2.937 2.802 5.335 8 6,733 6.210 5.747 4,968 4.639 4.344 4.078 3.837 3.619 3.421 3,329 3.241 3,076 2.925 5,759 7.435 6.802 6.247 5.328 4,946 4.607 4.303 4.031 3.786 3.566 3,463 3.366 3.184 3,019 10 8.111 7.360 6.710 6.145 5,650 5.216 4.833 4,494 4,192 3.923 3.682 3.571 3.465 3.269 3.092 11 8,760 7.887 7.139 6.495 5.938 5.453 5,029 4,656 4.327 4.035 3.776 3.656 3,544 3,335 3.147 12 9,385 8.384 7,536 6,814 6.194 5.660 5.197 4,793 4.439 4.127 3.851 3.725 3,606 3.387 3.190 13 9.986 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 4,203 3.912 3.780 3,656 3.427 3.223 7.367 14 10.563 9.295 8.244 6,628 6.002 5,468 5.008 4.611 4.265 3.962 3,824 3.695 3,459 3.249 9.712 4,675 3.726 15 11.118 8.559 7,606 6.811 6.142 5,575 5.092 4.315 4.001 3.859 3.483 3.268 20 13.590 11.470 9.818 8.514 7.469 6.623 5.929 5,353 4.870 4.460 4.110 3,954 3.808 3.546 3,316 9.427 30 17.292 13.765 11.258 8.055 7.003 6.177 5.517 4,979 4,534 4.160 3,995 3.842 3.569 3.332 40 19.793 15,046 11.925 9.779 8.244 7.105 6.234 5.548 4.997 4,544 4.166 3,999 3.846 3,571 3.333 LC co