Required information Use the following information to answer questions 45-47 [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. Cost of acquiring additional land for runway Cost of runway construction Cost of extending perimeter fence Cost of runway lights Annual cost of maintaining new runway Annual incremental revenue from landing fees $ 70,500 230,000 15,111 37,000 18,500 37,500 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 $140,000. The old snowplow could be sold now for $14,000. The new, larger plow will cost $10,500 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 $98,000 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 20 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Problem 16-47 Internal Rate of Return; Sensitivity Analysis (Section 1) (LO 16-1, 16-3) 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 20 percent. The County Board of Representatives believes that if the county conducts a promotional effort costing $23,000 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 20 percent? (Round your intermediate calculations and final answer to the nearest whole dollar.) Required increase in tax revenue Future Value and Present Value Tables Table Future Value of $1.00+ Period 4% 1 1.010 1.000 10% 12% 20% 1.000 1.100 1.126 1140 1.200 1.450 2 1083 1.134 1.16 OIC! 10 1.191 1331 1405 1.723 1452 1650 4 LITO 1.263 1.361 1461 1.574 2074 5 LICE 1330 1360 1611 762 1995 2.400 6 COCI 1419 1.53 L772 1974 2956 2 1.504 1.919 2211 2.476 1300 1433 1.690 1.999 5.100 2.59 2594 10 1+30 .291 2.159 3.106 1.707 6.192 TE 150 1.800 2.332 2.953 3470 4.226 7430 12 1601 2012 2.318 110 3.596 SIST 3910 2.133 2.720 3.452 4164 3.492 109 1732 2.261 2.937 3.298 1992 6.261 12920 15 1 301 2397 3.172 11 5214 TUS 15.02 20 2.19 3.207 10+ 9646 13.743 23 50 950 237300 5.744 10.06 17450 29.960 4301 10286 21.72515200 93.051 30 850 1.100.000 Table (1+)-1 Fiture Value of a Soros or $100 Cash Flows Ordinary Arty le 10% 1.000 3440 4.921 12% 1.000 22120 374 4.779 6353 2.100 3310 1.641 6.105 7.716 9457 1.00 2.000 3346 4.500 5.367 7336 3933 1067 12.400 20% 1.000 2220 3640 5365 7442 Period 4% 1 1.000 2 2010 3 3.122 4 1247 5 5416 6 6631 7 7.00 9714 . 10.50 10 12.000 13486 12 15.026 16027 14 12292 15 20004 20 29.778 30 56.005 10 95.026 9930 8 1.000 2000 3154 4375 5.637 6.975 1391 9895 31491 13.161 14.972 10 570 15.552 21.015 31 276 16.775 79.00 154.762 13.550 15.935 15:531 21353 166-16 18977 21.49 24215 27 152 45.760 113.283 299057 10.099 12.300 14776 1750 20655 24133 23.029 12.193 37.230 75052 241330 76700 6.610 3536 10.730 13233 16.005 19337 23.015 27.27 32.009 37 SOL 13.142 91025 356.790 142.000 12.010 10.499 20.799 25959 32150 39 530 +5497 59.196 72035 27.976 31.773 164496 43597 116.900 743900 Table 1 Prasant Vale of 100 1 Period 4% KO 10% 12% 14% 165 10% 20% 22% 24% 20% 20% 30% 32% 296 $47 333 320 781 1 2 3 296 SCO 926 357 909 M 393 297 791 630 100 23 16 306 650 524 943 20 S40 .792 019 675 379 351 .451 751 653 621 760 392 455 350 269 355 322 516 TS 590 415 329 250 .735 631 6.36 567 SOD 397 315 392 519 477 373 291 182 402 5 476 370 790 507 315 COC 275 6 7 199 410 354 250 198 203 300 705 565 027 593 558 630 593 50 500 561 313 467 424 386 29 204 179 157 731 703 676 100 TOT 195 ZE 351 303 2.0 305 263 314 26 225 191 9 178 139 100 085 159 125 094 073 165 167 132 200 190 10 (TT 162 116 000 11 650 COL 006 195 165 211 37 205 132 12 13 14 002 527 1977 360 340 15 257 229 137 T16 033 040 601 572 555 007 0.36 027 319 290 260 239 090 076 061 040 040 092 075 062 05 093 023 055 OSO ORD 345 033 025 020 CIT 160 125 100 910 15 LIT 155 10 SO! 031 025 20 149 010 003 004 456 32 215 300 099 205097046 104 073 033 01100 051 012 003 0.97 007 001 016 .003 DIA 002 057 022 100 100 100 100 OF Table IV Present Vokie or series of $100 Cash Flows 11 + Period 4% 30% 8% 0.93 1 0,962 3 2013 3610 4452 3573 5465 2212 0.769 1.361 1516 2166 2.4.36 5 6 5.242 7 4917 3512 6210 6.902 10% 12% 14% 10% 135 20% 22% 24% 25% 26% 20% 0.920 09090.893 0.977 0.362 0347 0.000 0.820 0.206 0.000 0.794 0.751 1.783 736 1.600 1647 1605566 1.5291492 1457 1424 1.392 25TT IST 2.400 2.322 2216 2174 2.106 2012 19 1952 1.933 1.300 3312 317010372914 2.795 2096 2.389 2494 2.404 2362 2370 3.993 3.791 3.605 3.432 3.274 3.127 2.991 2.864 2.745 2.600 2005 2532 4.623 4.355 4TIL 3.899 3655 498 326 3.167 3.020 2.951 2052759 3.200 100 4.564 4.258 1039 3812 3.600 3.116 3342 3.101 3.0032.931 3.74735 4.965 4.639 44078 3.UT3.019 3421 339141 3.076 6.217 5.250 5.825 49:46 13607 1303 4.031 3.796 3.566 3.463.166 6.710 6.145 56505.216 4.833 3.923 3.632 3.571 31465 3261 7119005 3.933 3.555.629 4656 4.327 4.035 3.726 3050 3564 3335 7536 6814 5.666 3.1974.793 4.439 4127 3:3513.725 3.500 3357 7.901 7.10364245,942 5.324.910 4.533 4.203 3912 3.700 3.656 3.427 5.244 7367 6,625 6.002 5.465 5005 4611 4.265 3962 3.024 3.95 3.550 7.606 6,811 6.12 5.5755093 & 3.850 3726 2.642 2.500 2973 3.019 3.092 0 7.433 3.011 01 11 This 700 9335 9.936 10.563 2.147 1.190 3.223 14 15 3553 9.295 9.712 3. 20 30 40 13.90 17.292 19.793 11470 13.705 15.046 OSIS 351 7.4696.628 11.258 2.427 8.055 7.003 11.9239.779 0244 7:105 5.9295.53 4.570 4.4504110 3951 2.500 6.177 5517 4.979 4534 4.160 3.995 3.342 3507 6.23455434997 4.444.1663999 3346 3371 3316 3.332 3.333