El Paso Water Utilities purchases surface water from Elephant Butte Irrigation District at a cost of $120,000 per month in the months of February through September. Instead of paying monthly, the utility makes a single payment of $800,000 at the end of the calendar year (December) for the water it used. The delayed payment essentially represents a subsidy by the irrigation district to the water utility. At an interest rate of 0.25% per month, what is the amount of the subsidy?
El Paso Water Utilities purchases surface water from Elephant Butte Irrigation District at a cost of $120,000 per month in the months of February through September. Instead of paying monthly, the utility makes a single payment of $800,000 at the end of the calendar year (December) for the water it used. The delayed payment essentially represents a subsidy by the irrigation district to the water utility. At an interest rate of 0.25% per month, what is the amount of the subsidy?
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications
Section: Chapter Questions
Problem 30P
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El Paso Water Utilities purchases surface water from Elephant Butte Irrigation District at a cost of $120,000 per month in the months of February through September. Instead of paying monthly, the utility makes a single payment of $800,000 at the end of the calendar year (December) for the water it used. The delayed payment essentially represents a subsidy by the irrigation district to the water utility. At an interest rate of 0.25% per month, what is the amount of the subsidy?
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