Gce Model Questions Vol1 2018 Economics Question 33

Practice objective / multiple choice question 33 from the 2018 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2018 Economics Objective / Multiple Choice Hard Difficulty
Question 33 GCE_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

A government is evaluating a new road project. The road will reduce the travel cost per trip from \(\text{₦}150\) to \(\text{₦}90\). It is expected that 10,000 trips will be made each year. The construction cost is \(\text{₦}8{,}000{,}000\) and the annual maintenance cost is \(\text{₦}200{,}000\). Using a discount rate of 5% per annum, calculate the net present value (NPV) of the project over a 20‑year horizon. Should the project be undertaken?

Answer Options

A. NPV ≈ \(\text{₦}1{,}250{,}000\) (positive); therefore the project should be undertaken.
B. NPV ≈ \(\text{₦}500{,}000\) (positive); therefore the project should not be undertaken.
C. NPV ≈ \(-\text{₦}2{,}500{,}000\) (negative); therefore the project should be undertaken.
Correct Answer D. NPV ≈ \(-\text{₦}3{,}015{,}200\) (negative); therefore the project should not be undertaken.
Correct Answer
D
Correct Option:
NPV ≈ \(-\text{₦}3{,}015{,}200\) (negative); therefore the project should not be undertaken.

About This Question

This is Gce Model Questions Vol1 2018 Economics Question 33. It is one of the objective questions from the 2018 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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