On April 15, 2006 control over the Indiana Toll Road was rented to a private com

Question

On April 15, 2006 control over the Indiana Toll Road was rented to a private company for a period of 75 years in exchange for a payment (rent) to the state of Indiana in the amount of $3.8 Billion. The terms of the agreement required the winning bidder to maintain the roadway and upgrade it during their term as custodian. The winning bidder pledge $4.4009 Billion (present value) worth of upgrades, and maintenance to oe spread out evenly over the course of the 75 year agreement. The state also permitted a toll rate increase at a constant rate of 2% per year for the term of the agreement. The initial toll rate was as follows: Class II $0.0510/mile Class III $0.059/mile Class IV $0.088/mile Class V$0.114/mile Class VI $0.134/mile Class VII $0.249/mile As of April 15 2006 the average annual volume was 50.5 million vehicles per year. This breaks down in to the follow allocation by classification: Class II: 71.2% Class III 3.5% Class IV 1.4% Class V: 21.1% Class VI: 2.5% Class VII: 0.3% Traffic was expected to grow at a uniform rate of 0.55% per year. Assume the average trip length was 75 miles and will remain unchanged throughout the 75 year period. Administrative costs for operating the toll road were at a mean of $29.9 million / year in 2006 and expected to increase 5.1% per year. With a group of no more than four, determine the maximum interest rate allowable for this investment to breakeven, and explain the impact if changes occur in traffic volume.

Explanation / Answer

Let us make a formula for the above ... just looking at the first year to begin with:

$1,000.00 + ($1,000.00

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.