The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Year Contract Cost Stand-alone selling price Construction Service 1 70 Forecast cost + 10% 2 80 Forecast cost + 20% Operation Services 3-5 25 Forecast cost + 30% Road resurfacing 4 15 Forecast cost + 10% Compute for the profit for year 2. show your good accounting form for the solution. you!
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