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The City of Washington is considering adding new buses for its current mass-transit system that links from the Tacoma International Airport to the clustering city destinations on non-stop basis. The total investment package is worth $10 million and expected to last 10 years with a salvage value of $850,000. The annual operating and maintenance cost for buses would be $5 million during the first year and will grow by 5% each year over the previous years O&M costs thereafter. If the system is used for 800,000 trips per year, what would be the fair price to charge per trip? Assume that the City of Washington uses 5% interest rate for any city-sponsored project. Assume the fare will be the same for all destinations.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91922435

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