A public agency is contemplating construction of a facility with the following operating cash flow (in...

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A public agency is contemplating construction of a facility with the following operating cash flow (in thousands of constant dollars) at year ends. Year 3 4 Cash Flow -$400 -$200 $280 $300 $320 $340 The MARR of the agency is 10% including inflation. If the agency can financing this facility in one of the following two ways, which financing scheme is preferable? 1. Overdraft financing at an interest rate of 12% per annum. 2. Five year coupon bonds (so that all principal is repaid at the end of year 5) in the amount of $672,000 including an issuing cost of 5% and at a 10% interest rate. A public agency is contemplating construction of a facility with the following operating cash flow (in thousands of constant dollars) at year ends. Year 3 4 Cash Flow -$400 -$200 $280 $300 $320 $340 The MARR of the agency is 10% including inflation. If the agency can financing this facility in one of the following two ways, which financing scheme is preferable? 1. Overdraft financing at an interest rate of 12% per annum. 2. Five year coupon bonds (so that all principal is repaid at the end of year 5) in the amount of $672,000 including an issuing cost of 5% and at a 10% interest rate.

Answer rating: 100% (QA)

Answer Public agency should choose the option 2 financing using issues of Five year coupon bond Opti... View the full answer