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
Determine the Present Value of An Annuity and give explanation of this topic?????

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

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

Following the Initial Public Offering (IPO), the shares of Rosetta Stone, the language instruction company, jumped almost 44 percent from an initial price of $18 to $25.55 in late-

Leverage or Gearing Ratios Leverage or gearing ratios are as follow: a) Debt ratio = Total debts/Total assets Whereas total debt = fixed charge capital + liabilities.

Dividend Basis Valuation Ownership of shares in entities - The owner to obtain a cash flow consisting of future dividends and the value of a share must correspond to the recen

On the 5 th of March 2009, the Bank of England (BoE) lowered its main interest rate to 0.5%, the lowest on record since the Bank has published rates in 1970, which still remains u

Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.

A firm has a $100 million capital budget. It is considering two project, each costing $100 million. Project A has an IRR of 20%; has an NPV of $9 million; and will be terminated af

Do your experts provide Future Value of Single or Multiple Cash Flows assignment help? I need urgent help in my college assignment.