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
BAC is considering an issue of preferred stock.  The dividends are 8.12% of the $25 par value. a.    If the present price is $26.25 per share, what is the return on the preferre

Ask question #Minimu• 1.What is an Auction? E Bay is a market leader in online auction sites. Discuss SWOT for E bay using your web sources?. 2.Why so many entrepreneurs drawn to

Information Signaling Effect Theory Advanced via Stephen Ross in year 1977, He argued such in an inefficient market; management can utilize dividend policy to signal significa

1.  A company is trying to decide which one of two projects it should accept. Both projects have similar start-up costs. Project 1 will generate annual cash flows of $52,000 a year

Illustrate the role of credit unions in depository institutions. Credit unions: Credit unions are non-profit institutions equally organised and owned through their member

explain the main sources of finance ?

Contracting Cost - Agency Costs These are costs acquired in devising the contract between the shareholders and managers. The contract is drawn to ensure management act in t

Market Model - Methods of Computing Cost of Capital This model is utilized to establish the percentage cost of ordinary share capital cost of equity (K e ). If an investor is

You are required to select any one company of your choice which is listed on either Dubai Financial Market (DFM) or Abu Dhabi Securities Market (ADSM). Send me an email giving at l

Accept or Reject Rule of NPV Under this method, a company should accept an investment venture if N.P.V. is positive that is if present value of cash outflows exceeds such of c