The City of P is considering purchasing the water utility from Illinois American Water Co. and creating a public utility district (true story). Suppose that the purchase price would be negotiated to $200 million, and each year it would save Peoria ratepayers $13 million for the foreseeable future. 

(a) If Peoria used δ = .93 to determine its investment priorities, would this be a worthwhile investment? (b) What about at δ = .97? (c) Calculate the value of δ where Peoria would be indifferent about purchasing the company.

Answer rating: 100% (QA)

a No if 8 93 then this would not be a worthwhile investment This is because the pr... View the full answer