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The county municipal council owns a toll bridge that costs the county $250,000 every year to operate and $130,000 a year to maintain. The facility brings in revenue of $500,000 per year. There is a proposal to sign a 10-year lease of the bridge to a private operator who will give the city $1 million upfront with the understanding that the private operator will be responsible for the operation and maintenance of the bridge

Throughout the lease period and will always keep its level of service above a certain threshold. Assume a 2% interest rate. In your opinion, should the proposal be accepted? Extra Credit: At what interest rate will your decision change?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91229914

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