This is finance problem. Please solve the number 3.
3. Conduct a Bcisnrst Case analysis and cumplstc the below table Table 2. Sensitivity Analysis Net Prescnt Valuss {2U 17 3) Manual Tolls IZoom Bass Assumptions BANI BANE. Best Cass BUN] BENZ Worst Case WCNI WON? To raise some revenue to nd other operations, the County is considering turning the stretch of TENT-3T that passes through the county into a toll road. You are an analyst for New lCapital, an investment rm that is considering whether to contract wh the County to lease and operate the toll road. You are writing this memo to Susan Jansen, the director of New Capital, given the following information provided by the county. All project data, and appreciation rates, are in NDLMNAL terms. The annual ination rate is expected to be 3.3% over the lifecycle of this project. The project would start immediately (EDIT would be year (It). The county would lease the road for an initial xed payment of $2 million in year t], and yearly lease payments of $535, in years I through 25. In year 26, the toll road reverts back to the county. The lessee will have two options for the collection of tolls. First, they could install manual toll booths in which employees would collect tolls at each end of the stretch of road, and charge a at rate of $21M} for cars ($4.00 for trucks) to use the entire length of road. These tolls would be adjusted periodically. The expectation is that tolls under this option would bring in $652,[}D{} in year 1, with an expected increase of 5% annually inyears 2-25. Second, they could replace some of the manual tolls in the rst option wil I-Zoom electronic toll booths, in which case $1.5 per car ($3. per truck) would automatically be debited each time a car (or truck) with a transponder went under the I-Zoom toll. Vehicles that didn't have the device would be charged $4.U per car (381"? per truck). This type of toll system is expected to yield revenue of $63,-{] in year I, and is expected to increase at 5% annually in years 2-25. Under either of these options, the increase in tolls could be as high as 6% annually or as low as 4% annually. The county has stipulated that the lessee of the road will be responsible for constructing toll booths [which will cost $163,1'J inyear G for all manual toll booths, or $335, inyear t} if a mix of manual and I-Zoorn booths are also used). The lessee will also be responsible for upgrading the road ($162, each year for years '3, 1, 2, and 3). The lessee will also have to maintain the road, which will cost $14,[}[} in year 4, and is expected to increase at 4.5% per year for years 5-25 (though the increase could be as high as 5% or as low as 4%]. In addition, they will have to pay for employees to collect and maintain the tolls. For manual tolls only, labor will cost $251,901] starting in year 1; for manual and IZoom, labor will cost \"Till-DID starting in year 1. Labor costs are expected to grow 5.2%: annually, but the growth could he as low as 4.?% or as high as 53%- To help defray the costs of construction and maintenance, the lessee will he allowed to sell advertising along this stretch of road. This is expected to yield revenues of about $32,{l{l{l in year 1, increasing at 4% anmrally. Finally, a tax of 4-9% of gross toll and advertising revenue would he paid to the state annually. The director ofthe rm wants to know if she should invest in this project, and ifso, whichtype of toll system should he built. Her REAL hurdle rate is 6%. You are to do an analysis of the two options under the set ofhase assumptions, as well as a best casea'worst case sensitivity analysis
