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
Asset: - An asset stands for an item of value owned and controlled by an organization which can generate revenue for the organization or can help in generating the organization re

how to do basic accountancy and what can i claim back

Suppose the Alctz Display Flowers pte  Ltd uses the periodic inventory system and  average cost to explain inventory cost. (a)  Determine the ending inventory cost as at Decembe

Instructions: Read the Herzberg findings related to extrinsic and intrinsic factors driving job satisfaction, dissatisfaction and motivation. To what extent should employers feel r

Explain Mechanics of security trading in Stock Exchange Introduction: An investor should have some knowledge of how the securities markets operate. Marketing of old or new se

1. Describe the similarities and differences in between an ordinary annuity, an annuity due, and perpetuity.  Provide a methodical answer, including examples to demonstrate your po

Explain about the functions of financial systems. Financial systems perform the necessary economic function of channelling funds through units who have stored surplus funds to

The scope of supply chain management  Supply chain management includes the determination of suppliers; distributors, distribution channels and warehousing; manufacturing infor

Miller-Orr Model Unlike the Baumol's Model, Miller-Orr Model is a stochastic or like probabilistic model that creates the more realistic assumption of doubt in cash flows.

(Interest-rate risk) Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilEl''s bonds have identical coupon rates of 9.125% but that one issue m