The mayor of your city is considering building a new toll road to reduce congestion. The cost of the toll road is $10 million and is estimated to generate a profit (from tolls collected less expenses collecting the tolls and maintaining the road) of $2 million per year.

A. What is the present value of the first year's profit of $2 million? (if discount rate is 8% (0.08))

B. If the discount rate is 8%, how many years would it take before the road is paid for?

The number of years it will take to recover the initial $10 million investment.