Washington Countys 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 boards decision appear below.

Cost of acquiring additional land for runway	$	79,500
Cost of runway construction		270,000
Cost of extending perimeter fence		19,840
Cost of runway lights		43,000
Annual cost of maintaining new runway		21,500
Annual incremental revenue from landing fees		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 countys hurdle rate for capital projects is 11 percent.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

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-a. Which of the data used in the analysis are likely to be most uncertain?

3-b. Which of the data used in the analysis are likely to be least uncertain?

Future Value and Present Value Tables Table 1 Future Value of $1.0011+ Period 45 1414 4. 2# 4 40 24 1. 4f4 4 .? 74 974 3 1.44) 1. 4 1.7| 13 3 251 s 34# atOE 347 33 2CH 42 13774 2 3 / 4 24 #jt . 7 3 f6443743 324 .74440 0 17.40 23 9% 84] 3 .pajnft ; S. + 41 fl616F1 1E146gbf W 40 Period Table II Future Value of a series of 31.00 Cash Flows Ordinary Amu + = E%B 1342 4 ) . JPG 2[a] 1 3.1 3142f 3310837 247474. 04.[444.77 47, 7y4 744E E: B49009 10/ 1216 0Fr jfhE37 114# 123@ 1833 jE4 4+ =Jf } 13 70/ 144/ 15. B /54 4 3 / br 14940 110 E L H/ 1154 /2/ n: 4 53 htm 1]#/ 447 4 1 224 [ H24 4577032 237.5g/ . 152 ] [24 ] .16 31.// 3 9240 27 4 57.276 7.7E + [EIA 9 reg1: ca // A 34fE4 4) fc157? c1f4 577e7434 10) 13431/ Table III Present of $100 [1 + ) * 34u f a7774374EFF 7? fit ? 574 3) 34.74.75172 [44 & qg g 4@ 40047744 iJA / /5 F E % /v/ 41/ E/ ? / / 2 0 3.747&E14607.4944374204424EptgA 1 2,707444t7039; g2707 9] . E3443@4 43429492.& 191 73474) + F4043E19Ef#33] 157 |31fr 1 2004jt 209314.1441#c48? 400?t 4436?? 03|/ gpr++ regta [g 1| HS/ 5374 36) 27 W a ? 1? | /9 / t 5 / / 4 24W2249320/f443/420gg643] 1 #4 Afti A w & 1481 ) [a] [utfF %E040 @33fc7 1p44 40 gs pp . 1 2 0 .cg? 04 . 03 ] [ 43 44731294.841ce [ry6c8404@ g02 H0 4%jijE14/A Int/IEWy90107f6fry 3 474cgg / g 02 . 04 ccg @ domDA = *# 4 fjft %E (Fr @fifrit- Table IV Present Value of Series of $1.00 Cash Flows eri4x6 ] 14162082224282a] 0+ 340 T+ are (0 Fet] 0 0 0 0Ft 04: 0 A# 0F] 07A 0.534 0.7 16 1 .1 1 S g ei@ 241474 ( 42 43 4 A** 3.0 3.4EE 238 3.4 3 [C3294427* 279 2 | 244 2.44 22 23 244 24 A_ 4E? |334 127 2 faE 24} 17, 1:|:17 gt Af 174E 2Fap9 A EP 234 242 42 43 Fgggag # r 3 2#| sg 23 R? A# 41 45 4Fai 4] ] fat 3 FE },41 124 21et A#3 ] 19 %7 .747 32; 494E4344403E