Recent flooding has damaged the spillway of the state

Assignment Help Financial Management
Reference no: EM13943611

Recent flooding has damaged the spillway of the state owned Crab Claw Dam near Puke Bay, Oregon, and it must be repaired or replaced. Two alternatives are available: (a) repair the existing spillway at a cost of $800,000 or (b) take this opportunity to build a new spillway and small hydroelectric power installation at a new site on the south side of the dam. Maintenance costs of the old spillway, if repaired, are estimated to be $20,000 per year. Construction costs for the hydroelectric project and new spillway are expected to be $1,500,000. Operation and maintenance costs for the hydroelectric portion are estimated to be $57,000 annually. Sale of electric power from the proposed installation is expected to provide an annual income of $80,000. A maintenance cost of the new spillway, if built, is estimated to be $10,000 per year. If the hydroelectric project is built, it will be necessary to fill in and close the existing spillway at a cost of $100,000. Assuming a 50-year life for all projects and an interest rate of 5%, compounded annually, which project would you recommend?

Reference no: EM13943611

Questions Cloud

The western capital growth mutual fund has total assets : The Western Capital Growth mutual fund has Total assets $ 714228000 Total liabilities $7567000 Total number of shares 27448000 What is the fund's net asset value (NAV)?
Constructing portfolio of two assets-sharpe ratio : You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 12 percent and 16 percent, respectively. The standard deviations of the assets are 29 percent and 37 percent, respectively.
What is the price of this bond in the market : A bond has a coupon rate of 6.5 percent, has a $1,000 face value and has 12 years to maturity. The yield to maturity on this bond is 10 percent. What is the price of this bond in the market? Assume semi-annual interest payments and round to the close..
Payment include escrow deposit for the tax and insurance : Rick Rueta purchased a $77,000 home at 8.5% for 30 years with a down payment of $15,000. His annual real estate tax is $1,692 along with an annual insurance premium of $852. Rick’s bank requires that his monthly payment include an escrow deposit for ..
Recent flooding has damaged the spillway of the state : Recent flooding has damaged the spillway of the state owned Crab Claw Dam near Puke Bay, Oregon, and it must be repaired or replaced. Two alternatives are available: Recent flooding has damaged the spillway of the state owned Crab Claw Dam near Puke ..
A leveraged merger is between unrelated firms : In a stock swap, the acquiring firm issues shares of stock in order to pay for the acquistion. a leveraged merger is between unrelated firms. a leveraged buyout involves creating a new company out of part of your company and then selling shares of th..
Tax considerations and their effect on mergers-acquisitions : What are the tax considerations and their effect on mergers and acquisitions? What effect do mergers and acquisitions have on future financial performance? Is there a balance sheet and income statement effect; if so what is/are they? What effect does..
Cost of equity capital under the proposed restructuring : Ngala Ltd. currently has no debt in their capital structure. They are considering recapitalizing the firm and adding about 25% debt. The loan requires an interest rate of 7%. The firm is in the 35% tax bracket. Currently, the firm has a beta of 1.02...
Compare and contrast the federalist and democratic : Compare and contrast the Federalist and Democratic-Republican attitudes toward the national government. Include a clear discussion of the differences their leaders held.

Reviews

Write a Review

Financial Management Questions & Answers

  How much can you withdraw from retirement plans

If you plan on making 20 equal withdrawals at the beginning of each year from the account (with the first withdrawal made at the end of the 30th year-the first year of retirement), how much can you withdraw?

  Individual rehabilitation services (irs)

Individual Rehabilitation Services (IRS), Determine the minimum federal income tax liability and the taxes owed at the time of filing based on the following data:

  Discounted cash flow approach-what is its cost of equity

The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $22.25 per share, its last dividend was $1.60, and the company will pay a dividend of $1.68 at the end o..

  Two loans generate approximately same income

The following are three one-year “discount” loans that a bank might offer to the customer. Determine the amount of interest the bank would make on each loan and indicate the amount of net proceeds that the bank would pay out on each loan. At what dis..

  What is the horizon or terminal value

The Sunnyside Corporation has expected dividends that are growing at high rate in Year 1=$2:00, Year 2= $3.50, Year 3=$5.50 and expects the dividends to grow at a constant 5% rate after Year 3. The investors require a 12% required rate of return. Wha..

  What is the pre-tax cost of debt

ABC Co. has an annual bond outstanding that matures in 10 years and pays a 6 percent coupon. The bond has a market value of $1,200. What is the pre-tax cost of debt?

  Issued bonds to finance the purchase of new building

Several years ago, the hospital needed additional space and issued bonds to finance the purchase of a new building. Each bond has a face value of $15,000, a 3.8% coupon rate, and a maturity of 20 years. Interest is paid semiannually. The current mark..

  Depreciated on straight-line basis to zero salvage value

Your company has been approached to bid on a contract to sell 4,900 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipmen..

  Considering increasing production after unexpected demand

Honda is considering increasing production after unexpected strong demand for its new motorbike. To evaluate the proposal, the company needs to calculate its cost of capital. You've collected the following information: The company wants to maintain i..

  What is the stock price for each company

Red, Inc., Yellow, Corp., and Blue Company each will pay a dividend of $2.65 next year. The growth rate in dividends for all three companies is 5%. The required return for each company's stock is 8%, 11% and 14% respectively.  What is the stock price..

  What is approximate percentage cost of non-free trade credit

Dixie Tours Inc. buys on terms of 4/15, net 60. It does not take discounts, and it typically pays 35 days after the invoice date. Net purchases amount to $720,000 per year. What is the approximate percentage cost of its non-free trade credit?

  About the save money

You are going to save money for your son’s education. You have decided to place $2,539 every half year at the end of the period into a saving account earning 8.14 percent per year, compounded semi-annually for the next 9 years. How much money will be..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd