To overcome the impacts of saltwater intrusion, San Diego County is planning to build a Seawater Desalination Plant. Construction of the facility will take three years and cost $15,000,000. The facility has an operating life of 47 years which starts in three years (after completing the construction phase). The entire project, therefore, spans 50 years. There is no inflation during the entire life of the project, and that all benefits and costs are known with certainty (rather unlikely assumptions but OK for early planning). The operating costs are $100,000 per year. The project will treat 30,000,000 gallons of water per year, and analytical investigations have suggested that the project produces the benefit of $0.05 per gallon of the treated water. The state is going to provide a loan to finance 40% of the capital cost ($15M) at a borrowing rate of 6.25% with 20 equal annual payments, including principal and interest. Considering MARR of 10% please answer eh following questions. With the given discount rate, calculate the NPV and the B/C ratio. Is the project a “worthy” investment for the State
To overcome the impacts of saltwater intrusion, San Diego County is planning to build a Seawater Desalination Plant. Construction of the facility will take three years and cost $15,000,000. The facility has an operating life of 47 years which starts in three years (after completing the construction phase). The entire project, therefore, spans 50 years. There is no inflation during the entire life of the project, and that all benefits and costs are known with certainty (rather unlikely assumptions but OK for early planning). The operating costs are $100,000 per year. The project will treat 30,000,000 gallons of water per year, and analytical investigations have suggested that the project produces the benefit of $0.05 per gallon of the treated water. The state is going to provide a loan to finance 40% of the capital cost ($15M) at a borrowing rate of 6.25% with 20 equal annual payments, including principal and interest. Considering MARR of 10% please answer eh following questions.
With the given discount rate, calculate the
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