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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

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 citys burgeoning power needs. The dam will cost $7.5 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%
(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 $1.5 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%______________; At 4%__________________________
Annuity Stream equivalent at 7%______________; at 4%_________________
NPV of supplemental investment at 7%______________; At 4%_____________

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