There are two towns A and B, which are on the opposite side of an island. Currently travelers between these two towns are serviced by a privately operated ferry. Between A and B, 10,000 ferry trips are made each year. The fare is $6 per trip, and the marginal cost of a trip is $2. If the government starts a bus service then the private operator will terminate the ferry service and sell the ferry. The ferry could be sold by the private operator for $20,000 and would be replaced by a bus service immediately and forever. Each person would be willing to pay $3 more to travel by bus, because of associated time-savings.Bus passengers will not be charged any money for a bus trip and it will be free. As a result the total number of annual trips have increased from 10,000 to 20,000. The marginal cost of a bus trip is $ 2. Further, the one time sunk costs of establishing the bus service would be $30,000 and there are annual maintenance costs of $1,000 in perpetuity.

What is the net present value of these benefits and costs given that the discount rate is 10%? Should the bus service be implemented? Why?