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# The City Council of Radiator Springs is considering a proposal to encourage tourism through the development of a water park. The

developers have asked the city to provide a grant of \$1,000,000 to help pay for construction of the park. They claim that the park will

increase sales and tourism taxes to the community in the amount of "at least" \$60,000 per year for 20 years. The mayor, who supports the

investment, claims that the grant will have a return on investment of 20 percent over the life of the project. Please format the answers as

required below.

A. Calculate the net present value of the proposed investment, with a discount rate of 4 percent (the current earning on Radiator Springs'

investment portfolio). Record the answer rounded to the dollar (e.g., 250,000, not 250,000.00) (5 points)

• NPV =

B. What is the internal rate of return on this proposed investment? Please report the IRR as a decimal and not percentage, carried out

to three decimal points (e.g., 0.025 or 0.037, not 2.5% or 3.7%) (5 points)

• IRR =