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 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 $ 79,500 270,000 19,840 43,000 21,500 52,500 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $170,000. The old snowplow could be sold now for $17,000. The new, larger plow will cost $15,000 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 $76,000 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.) Future Value and Present Value Tables Table I Future Value of $1.00(1+ Period 4% 6% 8% 10% 12% 14% 20% 1 1.040 1.060 1.080 1.100 1.120 1.140 1.200 2 1.082 1.124 1.166 1.210 1.254 1.300 1.440 3 1.125 1.191 1.260 1.331 1.405 1.482 1.728 4 1.170 1.263 1.361 1.464 1.574 1.689 2.074 5 1.217 1.338 1.469 1.611 1.762 1.925 2.488 6 1.265 1.419 1.587 1.772 1.974 2.195 2.986 7 1.316 1.504 1.714 1.949 2.211 2.502 3.583 8 1.369 1.594 1.851 2.144 2.476 2.853 4.300 9 1.423 1.690 1.999 2.359 2.773 3.252 5.160 10 1.480 1.791 2.159 2.594 3.106 3.707 6.192 11 1.540 1.898 2.332 2.853 3.479 4.226 7.430 12 1.601 2.012 2.518 3.139 3.896 4.818 8.916 13 1.665 2.133 2.720 3.452 4.364 5.492 10.699 14 1.732 2.261 2.937 3.798 4.887 6.261 12.839 15 1.801 2.397 3.172 4.177 5.474 7.138 15.407 20 2.191 3.207 4.661 6.728 9.646 13.743 38.338 30 3.243 5.744 10.063 17.450 29.960 50.950 237.380 40 4.801 10.286 21.725 45.260 93.051 188.880 1.469.800 Table II (1 + r)" - 1 Future Value of a Series of $1.00 Cash Flows (Ordinary Annuity) r Period 4% 6% 8% 10% 12% 14% 20% 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2 2.040 2.060 2.080 2.100 2.120 2.140 2.220 3 3.122 3.184 3.246 3.310 3.374 3.440 3.640 4 4.247 4.375 4.506 4.641 4.779 4.921 5.368 5 5.416 5.637 5.867 6.105 6.353 6.610 7.442 6 6.633 6.975 7.336 7.716 8.115 8.536 9.930 7 7.898 8.394 8.923 9.487 10.089 10.730 12.916 8 9.214 9.898 10.637 11.436 12.300 13.233 16.499 9 10.583 11.491 12.488 13.580 14.776 16.085 20.799 10 12.006 13.181 14.487 15.938 17.549 19.337 25.959 11 13.486 14.972 16.646 18.531 20.655 23.045 32.150 12 12 15.026 16.870 18.977 21.385 24.133 27.271 39.580 13 16.627 18.882 21.495 24.523 28.029 32.089 48.497 14 18.292 21.015 24.215 27.976 32.393 37.581 59.196 15 20.024 23.276 27.152 31.773 37.280 43.842 72.035 20 29.778 36.778 45.762 57.276 75.052 91.025 186.690 30 56.085 79.058 113.283 164.496 241.330 356.790 1,181.900 40 95.026 154.762 259.057 442.597 767.090 1.342.000 7.343.900 Table III 1 Present Value of $1.00 (1 + r)" Period 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 1 .962 .943 .926 .909 .893 .877 .862 .847 .833 .820 .806 .794 .781 .769 .758 2 .925 .890 .857 .826 .797 .769 .743 .718 .694 .672 .650 .630 .610 .592 .574 3 .889 .840 .794 .751 .712 .675 .641 .609 .579 .551 .524 .500 .477 .455 .435 4 .855 .792 .735 .683 .636 .592 .552 .516 .482 .451 .423 .397 .373 .350 .329 5 .822 .747 .681 .621 .567 .519 .476 .437 .402 .370 .341 .315 .291 .269 .250 6 .790 .705 .630 .564 .507 .456 .410 .370 .335 .303 .275 .250 .227 .207 .189 789 .760 .665 .583 .513 .452 .400 .354 .314 .279 .249 .222 .198 .178 .159 .143 .731 .627 .540 .467 .404 .351 .305 .266 .233 .204 .179 .157 .139 .123 .108 .703 .592 .500 .424 .361 .308 .263 .225 .194 .167 .144 .125 .108 .094 .082 10 .676 .558 .463 386 .322 .270 .227 .191 .162 .137 .116 .099 .085 .073 .062 11 .650 .527 .429 .350 .287 .237 .195 .162 .135 .112 .094 .079 .066 .056 .047 12 .625 .497 .397 319 .257 .208 .168 .137 .112 .092 .076 .062 .052 .043 .036 13 .601 .469 .368 .290 .229 .182 .145 .116 .093 .075 .061 .050 .040 .033 .027 14 .577 .442 .340 .263 .205 .160 .125 .099 .078 .062 15 .555 .417 .315 .239 .183 .140 .108 084 .065 .051 .049 .039 .032 .025 .040 .021 .031 .025 .020 .016 20 40 224 .456 312 215 .149 .104 .073 .051 .037 .026 30 .308 .174 .099 .057 .033 .020 .012 .007 .004 .019 .014 .010 .007 .003 .002 .001 .001 .005 .004 .208 .097 .046 .022 .011 .005 .003 .001 .001 Table IV 1 1 Present Value of Series of $1.00 Cash Flows 1 r (1) Period 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 25% 26% 28% 30% 1 0.962 0.943 0.926 2 1.886 1.833 1.783 3 2.775 2.673 2.577 4 3.630 3.465 3.312 5 4.452 4.212 3.993 0.909 0.893 0.877 0.862 0.847 1.736 1.690 1.647 1.605 1.566 2.487 2.402 2.322 2.246 2.174 3.170 3.037 2.914 2.798 2.690 3.791 3.605 3.433 3.274 3.127 2.991 0.833 0.820 0.806 0.800 0.794 0.781 0.769 1.528 1.492 1.457 1.440 1.424 1.392 1.361 2.106 2.042 1.981 1.952 1.923 1.868 1.816 2.589 2.494 2.404 2.362 2.320 2.241 2.166 2.864 2.745 2,689 2.635 2.532 2.436 6 5.242 4.917 4.623 7 6.002 5.582 5.206 S 6.733 6.210 5.747 5.335 9 7.435 6.802 6.247 5.759 5.328 4.946 10 8.111 7.360 6.710 6.145 5.650 5.216 4.833 4.355 4.111 3.889 3.685 3.498 3.326 3.167 3.020 2.951 2.885 2.759 2.643 4.868 4.564 4.288 4.039 3.812 3.605 3.416 3.242 3.161 3.083 2.937 2.802 4.968 4.639 4.344 4.078 3.837 3.619 3.421 3.329 3.241 3.076 2.925 4.607 4.303 4.031 3.786 3.566 3.463 3.366 3.184 3.019 4.494 4.192 3.923 3.682 3.571 3.465 3.269 3.092 11 8.760 7.887 7.139 6.495 5.938 5.453 12 13 14 15 2345 9.385 8.384 7.536 6.814 6.194 5.660 5.029 5.197 9.986 8.853 7.904 7.103 6.424 5.842 10.563 9.295 8.244 7.367 6.628 6.002 11.118 9.712 8.559 7.606 6.811 6.142 5.575 5.092 4.656 4.327 4.035 3.776 3.656 3.544 3.335 3.147 4.793 4.439 4.127 3.851 3.725 3.606 3.387 3.190 5.342 4.910 4.533 4.203 3.912 3.780 3.656 3.427 3.223 5.468 5.008 4.611 4.265 3.962 3.824 3.695 3.459 3.249 4.675 4.315 4.001 3.859 3.726 3.483 3.268 20 13.590 11.470 30 17.292 13.765 9.818 11.258 8.514 7.469 9.427 8.055 6.623 7.003 40 19.793 15.046 11.925 9.779 8.244 7.105 5.929 5.353 4.870 4.460 4.110 3.954 3.808 3.546 3.316 6.177 5.517 4.979 4.534 4.160 3.995 3.332 6.234 5.548 4.997 4.544 4.166 3.999 3.333 3.842 3.569 3.846 3.571 Required: 1. Compute the initial cost of the investment in the long runway. 2. Compute the annual net cost or benefit from the runway. 3-a. Determine the IRR on the proposed long runway. 3-b. Should it be built considering IRR? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the initial cost of the investment in the long runway. Initial cost of investment < Req 1 Req 2 > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the annual net cost or benefit from the runway. < Req 1 Req 3A > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Determine the IRR on the proposed long runway. (Round your answer to the nearest whole percent.) IRR % < Req 2 Req 3B > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Should it be built considering IRR? Yes ONO < Req 3A Req 3B > 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. Which of the data used in the analysis are likely to be most uncertain? Which are likely to be least uncertain? Required 1 Required 2 Required 3 Prepare a net-present-value analysis of the proposed long runway. (Round your "Annuity discount factor" to 3 decimal places. Amounts to be deducted should be indicated by a minus sign.) Annual incremental benefit Annuity discount factor Present value of annual benefits Initial costs: Net present value 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. The County Board of Representatives believes that if the county conducts a promotional effort costing $27,000 per year, the proposed long runway will result in substantially greater economic development than was projected originally. However, the board is uncertain about the actual increase in county tax revenue that will result. Required: Suppose the board builds the long runway and conducts the promotional campaign. What would the increase in the county's annual tax revenue need to be in order for the proposed runway's internal rate of return to equal the county's hurdle rate of 12 percent? (Round your intermediate calculations and final answer to the nearest whole dollar.) Required increase in tax revenue