determine the benefit - cost and benefit/cost ratios, Finance Basics

A City has determined that building a new water distribution system using a new source of water would have an annual costs of $5,750,000 and annual net benefits of $4,250,000. The contentious issue is how to measure the benefits versus cost when it involves a federal government subsidy of 70% for the new system.  The annual benefits (forever) are estimated at $4,250,000 and the annual operating costs are $250,000.  The initial cost is estimated at $71,875,000 and the city uses a rate of 8% in their calculations.

The council members agree that the project has a very long time span and converting values to annual equivalents (perpetuities) is correct.  They do not agree on how to include the government subsidy in their evaluations.

a. Determine the benefit - cost and benefit/cost ratios from a local perspective?

b. Determine the benefit - cost and Benefit/Cost values from the standpoint of an impartial citizen outside the community.

Posted Date: 3/14/2013 2:33:34 AM | Location : United States







Related Discussions:- determine the benefit - cost and benefit/cost ratios, Assignment Help, Ask Question on determine the benefit - cost and benefit/cost ratios, Get Answer, Expert's Help, determine the benefit - cost and benefit/cost ratios Discussions

Write discussion on determine the benefit - cost and benefit/cost ratios
Your posts are moderated
Related Questions
term paper about financial markets in pakistan


As the Chief Financial Officer for the wholly Australian owned, Australian Stock Exchange listed company, Toy Show Ltd., an importer and manufacturer of a range of quality children

Financial Planning A financial manager along with present investment policies will be concerned along with how efficiently the company's funds are invested since it is from t

Question: a) A bank lends you $1750 at an initial nominal yearly interest rate of 7.5% compounded semi-annually. However, the interest rate will rise to 9.2% after the first

1. The Marlin Company operates 50 weeks a year, and its cost of goods sold last year was $1,500,000. The firm carries six items in inventory: three raw materials, two work-in-proce

2.Calculating Project NPV-The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporation tax rate i

In order to value a debt security correctly, we must understand the terms and conditions of debt securities precisely. These terms define the contractual rights of the debt securit


"Managerial leadership considers that the focus of school leaders ought to be on functions, tasks and behaviours and if these functions are carried out competently the work of othe