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	$	100,000
Cost of runway construction		325,000
Cost of extending perimeter fence		30,640
Cost of runway lights		49,000
Annual cost of maintaining new runway		24,500
Annual incremental revenue from landing fees		67,500

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 $200,000. The old snowplow could be sold now for $20,000. The new, larger plow will cost $19,000 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 $136,000 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 20 percent.

1. Prepare a net-present-value analysis of the proposed long runway.

Incremental revenue from landing fees
Additional tax revenue
Annual incremental benefit	$0
Annuity discount factor
Present value of annual benefits
Initial costs:
Net present value	$0

2. Suppose the board builds the long runway and conducts the promotional campaign. What would the increase in the countys annual tax revenue need to be in order for the proposed runways internal rate of return to equal the countys hurdle rate of 20 percent?

Find Required Increase in Tax Revenue: