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 Based Valuation - Example K and K Company Limited is planning to absorb three other companies so as to realize its sales records of Sh.500, 000 per annum.  Its accountan

Supersoftware, Inc. earns a total of $200 million each year to pay out to their 20 million shareholders. They are in a very competitive business and have found it a struggle to com

Define two instances of Efficiency Ratio, Liquidity Ratio, Leverage Ratio? 1. Define two instances each of 'Efficiency Ratio', 'Liquidity Ratio', 'Leverage Ratio' and 'Prof

Constant amount per share or fixed D.P.S. 1. The DPS is fixed in total amount of irrespective of the earnings level. These generate certainty and are consequently preferred vi

Gross requirements of MRP System Accumulation of demand for this item from all sources independent and dependent. For instance, customer orders, spare part requirements, repla

ADan lives in Duncan, a small town in Arizona. Because of a rare blood disease, Dan is required to take special medical treatments once a month. The closest place these treatments

What are the types of Money and Bank Regulations? Types of Money : a. Commodity money b. A commodity-backed money c. Fiat money Bank Regulations: a. Deposit i

Current cost of a bond: You know that the after-tax cost of debt capital for Bubbles Champagne is 7 percent. If the firm has only one issue of five-year maturity bonds outstanding,

Solutions to the conflict - Relationship between Auditors and Shareholders 1. Firing The auditors may be detached from office at the AGM via the shareholders. 2. Lega

Functions of Capital Markets Functions of Capital Markets are as: 1. Providing long term funds that are essential for investment decisions. 2. Provide advices to investo