Question

A proposed airport terminal is expected to cost $16,000,000 with a life of 40 years. See Figure 3. The operating and maintenance costs are estimated as follows. • Operations begin at $1,000,000/year rising $50,000/year/year • Maintenance begin at $500,000/year rising 10% per year • Rehabilitation at the end of every 10 years $2,000,000 All costs of the terminal, including construction, will be financed at 6% and will be repaid by charging each passenger an "airport" fee. (a) Assuming 1,000,000 passengers per year for the life of the project, what fee should be charged per passenger to break even? Ignore inflation and taxes. (b) Assuming 100,000 passengers the first year of operation and an added 100,000 passengers each year thereafter, what fee should be charged per passenger to break even? Ignore inflation and taxes.

Answer 1

Pg No-1 Solution :- Given data : • A propose d airport • lite = 40 years. terminal is Expected cost = $16000,000 financing cost = 160,000,000 operating Cost = 1000000 + 1050000 + 1100000 +--- +2950000 Now, This is An the metic pring yession iş ; - Suman |2 ( 20 62 1 )xd) Then, Hese, Sum of operating costs over 20 years = - 20 (2* 1000000 + 39 * 50.000) = 79000000 → Maintanance Cost = 500000 +500000 (:1) + 500000() +- + 50000 (11) 39 this is Grenimel vic Progresion : - Sum of Geometric progression = acon-1)/o-1

Pg No- → Sum of maintenance costes over 30 years :- = 500000 (1,40-1)/1.1 - 1 = 22129627718 Rehabilitation Cost :- 2000000 x4 = 8000000 → Sum of Al financing, operating maintenance And Rehabilitation Cost = 31529627708 Interest paid af → fainancing these Cost s= 18917776:67 Now, Total cost Including Interest - 334219054,5 At Break Even point :- Total Revenzie = Total cost from Each * number of Passengers in 40 years & Fees charged Passenger = Total cost in 40 years. = 40000000 *P = '3342/4054:5 P = $8.35

Pg No- Passengers = 100000 + 200000+ --- 1000000 Total Number of = 20 (2* 1000000 +39* 1000000) = 82000000 Hence, Tees charged - 324214054,5 82000000 -$4.07578 i fees charged = $4,07578