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A value-for-money test: build it ourselves or use a PPP?
The prompt
A regional government needs a new road. Option 1: build it itself for USD 100 million now and pay USD 3 million a year to maintain it for 20 years. Option 2: a PPP partner builds and maintains it, and the government pays USD 10 million a year for 20 years, reduced if lanes are closed. At a 5 percent discount rate, the present value of USD 1 a year for 20 years is about 12.46. Which option costs less in present value?
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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