Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. example 10.2 a state government is planning a hydr

EXAMPLE 10.2 A state government is planning a hydroelectric project for a river basin. In...

90.2K

Verified Solution

Question

Accounting

image

image

EXAMPLE 10.2 A state government is planning a hydroelectric project for a river basin. In addition to the production of electric power, this project will provide flood control, irrigation and recreation benefits. The estimated benefits and costs that are expected to be derived from this project are as follows: Initial cost = Rs. 8,00,00,000 Annual power sales = Rs. 60,00,000 Annual flood control savings = Rs. 30,00,000 Annual irrigation benefits = Rs. 50,00,000 Annual recreation benefits = Rs. 20,00,000 Annual operating and maintenance costs = Rs. 30,00,000 Life of the project = 50 years Check whether the state government should implement the project (Assume i = 12%) EXAMPLE 10.3 Two mutually exclusive projects are being considered for investment. Project Al requires an initial outlay of Rs. 30,00,000 with net receipts estimated as Rs. 9,00,000 per year for the next 5 years. The initial outlay for the project A2 is Rs. 60,00,000, and net receipts have been estimated at Rs. 15,00,000 per year for the next seven years. There is no salvage value associated with either of the projects. Using the benefit cost ratio, which project would you select? Assume an interest rate of 10%

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students