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The population in Sydney is expanding rapidly. To accommodate for forecasted population growth in Sydney, Sydney Airport is planning for an expansion of its international
The population in Sydney is expanding rapidly. To accommodate for forecasted population growth in Sydney, Sydney Airport is planning for an expansion of its international terminal. The expansion will need to occur once Sydney's population reaches 7 million. Based on current growth rates, Sydney will reach a population of 7 million 11 years from now. At this time, the expansion cost is expected to be $550,000,000. On top of this expansion cost, the current services at the airport will need upgrading. These services include additional security checkpoints, ticketing lines, baggage claim and baggage handling areas. The costs for these additional upgrades will begin 3 years from now, with an initial payment of $20,000,000 at the end of year 3. These costs will continue annually and are expected to increase by $5,000,000 each year up until EOY 11 (Note: make sure you include the annual expense at EOY 11). How much does the airport need to set aside now to pay for these costs, if the company can earn 10% per year, compounded every 4 months (i.e. There are three compounding periods per year)
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