The federal Government Purposes to construct Multi Purpose water Project. This Project will provide water for irrigation and for municipal uses. In Addition, there will be Flood Control Benefits and recreation Benefits. The Estimated project Benefits computed for 10 year periods for the next 50years are given in table.
The Annual Benefits may be assumed to be one tenth of the decade benefits. The O & M Cost of the project is estimated to $15000 per year. Assume a 50 Year Analysis Period with no net project salvage Value.
Purpose 1 decade 2 decade 3 decade 4 decade 5 decade
Municipal 40000 50000 60000 70000 110,000
Irrigation 350000 370000 370000 360000 350000
Flood Control 150,000 150,000 150,000 150,000 150,000
Recreation 60,000 70,000 80,000 80,000 90,000
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Total 600,000 640,000 60,000 660,000 700,000
a) If an Interest Rate of 5% is used and there is a B/C ratio of unity, then what Capital Expenditure can be justified to build the water project now?