determine the benefit - cost and benefit/cost ratios, Finance Basics

Assignment Help:

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.


Related Discussions:- determine the benefit - cost and benefit/cost ratios

Challenges to finance manager., Ask question #Minimum what are the challeng...

Ask question #Minimum what are the challenges that a finance manager may face?

Information signaling effect theory, Information Signaling Effect Theory ...

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

Management money, where can I get money and how can I manage it

where can I get money and how can I manage it

Payback period method - traditional methods, Payback Period Method - Tradit...

Payback Period Method - Traditional Methods This method gauges the viability of a venture via taking the outflows and inflows over time to ascertain how soon a venture can pay

Capital Allocation, Consider the following capital market yielding 1% per y...

Consider the following capital market yielding 1% per year and a mutual fund consisting of 60% stocks and 40% bonds. expected return of stocks 9.75% per year and expected return on

5 problem excel on time value concepts, How quickly could something like th...

How quickly could something like this be done? And how confidential is this? Has any student ever been caught using this service?

Factors to increasing the profitability of a business, Factors contribute t...

Factors contribute to increasing the profitability of a business Several other factors contribute to increasing the profitability of a business. For companies that are highly d

Running own small businesss, how to do basic accountancy and what can i cla...

how to do basic accountancy and what can i claim back

Write Your Message!

Captcha
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