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
Dividend Cover Ratio Dividend cover = EPS/ DPS = Earning to ordinary shares/Dividend paid       This signifies the number of times dividend can be paid from earnin

Capital Corporation, which has a target capital structure of 40 percent debt and 60 percent common equity, is evaluating an expansion project with an 8.5 percent IRR. The project c

Revenue Reserves - Retained Earnings These are undistributed earnings.  Those reserves are retained for the given reasons like: A. To create up for the fall in profits so a

Investment  Attributes/  Factors  Influencing  Selection  of  Investment In  choosing specific  investments,  investors  would require definite  ideas  regarding  features

John has just inherited $50,000 from his Uncle Ted. John is currently studying his Bachelor of Accounting degree at CQUniversity part-time and has three (3) years of study remainin

Example of EOQ Assumptions ABC Ltd requires 2,000 units of a component in its manufacturing method in the coming year that costs of Sh.50 each. The items are obtainable locall

Calculate total number of ordinary shares Example Company XYZ Ltd has sold 10,000 ordinary shares of Shs.30 as partly called up plus 20,000 Shs.45 preference shares, tha

Attributes of venture capital Equity participation Venture Capital participates with direct purchase of shares or fixed return securities as debentures and prefere

You need cash and FAST! You jump out of your car at a location known to have one ATM, but a history of a line. Usually you can expect to wait 200 seconds from the time you arrive

Imagine Joy is the sales manager in a computer retail company and has summarized for each sales transaction the following information: Sales person Date of sales Uni