Assignment:
Ohio department of transportation is planning to build a new toll road and is considering two distinct configurations. The initial costs and annual costs and benefits for each configuration are shown below. The toll roads are each expected to last 10 years.
Alternative 1 Alternative 2
Initial cost $15 000 000 $25 000 000
Annual operating costs $15 000 $10 000
Annual benefits $1 200 000 $1 900 000
Use average rate of return of 5%
Which project to select using NPV? What are the NPV values for each project?