Gce Model Questions Vol1 2019 Economics Question 30

Practice objective / multiple choice question 30 from the 2019 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2019 Economics Objective / Multiple Choice Hard Difficulty
Question 30 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

Government is evaluating a 10‑year highway project. The construction cost of ₦500 million is incurred at the start (year 0). Annual maintenance costs are ₦15 million each year for years 1 to 10. The project generates annual benefits of ₦80 million in year 1, which grow at 3 % per year thereafter. The social discount rate is 5 % per annum.\ (a) Calculate the net present value (NPV) of the project.\ (b) Should the project be undertaken on the basis of the NPV?\ (c) Approximate the internal rate of return (IRR) of the project to the nearest 0.1 %.

Answer Options

Correct Answer A. (a) NPV ≈ ₦84.2 million; (b) Yes, undertake the project; (c) IRR ≈ 8.1 %
B. (a) NPV ≈ ₦-5.8 million; (b) No, do not undertake the project; (c) IRR ≈ 4.2 %
C. (a) NPV ≈ ₦70.5 million; (b) Yes, undertake the project; (c) IRR ≈ 7.4 %
D. (a) NPV ≈ ₦84.2 million; (b) No, do not undertake the project; (c) IRR ≈ 8.1 %
Correct Answer
A
Correct Option:
(a) NPV ≈ ₦84.2 million; (b) Yes, undertake the project; (c) IRR ≈ 8.1 %

About This Question

This is Gce Model Questions Vol1 2019 Economics Question 30. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

View More Gce Model Questions Vol1 2019 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support