Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The folowing information applies to the questions displayed below. Washington County's Board of Representatives is considering the construction of a longer runway at the county
The folowing 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 $ 70,000 200,000 29,840 39,600 28,000 40,000 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 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which wil cost $100,000. The old snowplow could be sold now for $10,000. The new, larger plow will cost $12,000 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 $64,000 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 12 percent Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Award: 14.00 points Required 1. Prepare a net-present-value analysis of the proposed long runway. 2. Should the County Board of Representatives approve the runway considering NPV? 3-a. Which of the data used in the analysis are likely to be most uncertain? 3-b. Which of the data used in the analysis are likely to be least uncertain
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started