Q:- An outer beltway is being planned for a metropolitan area in your state. The

Question

Q:- An outer beltway is being planned for a metropolitan area in your state. The initial cost is estimated to be $150M. Benefits are expected to be $8M a year. Annual maintenance costs are expected to be about $800K. The beltway will have to be resurfaced every 10 years at a cost of $6M. The city has raised enough money for this project by selling bonds with a 4% coupon rate. If the life of the beltway is expected to be 40 years, what is the modified B/C ratio for this project?

A) 0.66
B) 1.16
C) 1.27
D) 0.89

Explanation / Answer

c) 1.27

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