Question

A toll road is to be resurfaced in 5 years at a cost of 30 million dollars. At a nominal annual interest rate of 7.5 percent, compounded monthly, what are the required toll receipts per vehicle ($/vehicle, two decimal places) if traffic will be constant at 100,000 vehicles per month

Answer 1

$4.14

Step-by-step explanation:

FV: Future value; PV: Present Value; i/r: Interest rate

n = 5 years = 5x12 = 60 months

i/r = 7.5% / year = 0.625%/month (compounded monthly)

FV = $30m (in 5 years)

PV = 0

PMT (Toll receipts per month) = ?

By inputing all these information into a financial calculator,

we have PMT = $413,638.46

Required Toll receipts per vehicle = $413,638.46 / 100,000 = $4.14