# FULL WORK AND FORMULAS NEED TO BE SHOWN no excel CVC supplies power to the city of

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## Question:

FULL WORK AND FORMULAS NEED TO BE SHOWN no excel

CVC supplies power to the city of Cali in Columbia, South America. They are planning to build a dam to meet the city$$s burgeoning power needs. The dam will cost $$7\mathrm{.}5$ million up front to build and will begin producing electricity the following year. The production of electricity is valued at $$900,000/$yr and the dam will produce a constant value for $17$ years at which time it must be closed due to siltation.

$($a$)$ If the real interest rate is $7\%,$ what is the net present value of the project? At $4\%?$

$($b$)$ What is the annuity stream equivalent of this net present value? At $7\%?$ At $4\text{}\%$

$($c$)$ CVC is contemplating subsidizing large scale pine plantations by private landowners who own the surrounding denuded hillsides. Colombian hydrologist have estimated that an initial $$1\mathrm{.}5$ million dollar subsidy at the time of building will be dam increase the longevity of the project $10$ years. This will result in an extra $10$ years of annual returns of $900,000/$yr$.$ What is the net present value of this supplemental investment at $4\%$ and $7\%?$

NPV of project at $7\%\text{}\_\_\_\_\_\_\_\_\_\_\_\_\_\_$; At $4\%\text{}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

Annuity Stream equivalent at $7\%\text{}\_\_\_\_\_\_\_\_\_\_\_\_\_\_$; at $4\%\text{}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

NPV of supplemental investment at $7\%\_\_\_\_\_\_\_\_\_\_\_\_\_\_$; At $4\%\_\_\_\_\_\_\_\_\_\_\_\_\_$