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
Problem: (a) Describe why a critical analysis of the following is important while reading a research article: (i) The author, (ii) The date of publication. (b) What do

Liquidity Preference Theory This theory states that short term bonds are extremely favorable than long term bonds for two (2) purposes. 1. Investors usually prefer short te

how to make a perdiem claim format to maintain the records of staff

Why are financial institutions heavily regulated, with specific focus on their ability to increase or reduce the money supply?

Debt Finance in US of Small Companies Why It CAN Be Difficult For Small Companies to Raise Debt Finance in US Lack of safety avoidances of finances available

1) What happens to the portfolio standard deviations as the investor substitutes the foreign securities for the U.S securities? What combination of U.S and Japanese stock minimizes

Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose

What is the Objectives of Listing Objectives of listing are mainly to: (i) Provide liquidity to securities. (ii) Mobilize savings for economic growth. (iii) Protect

Example of Asset Based Valuation Extracted information from the books of Kent Limited.   Current liabilities Bank overdraft    Sh. 300,000

1. Each project has RM 10,000, and the cost of capital for each project is 12%. The projects' expected cash flows are as follows: Expected Net Cash Flows YEAR