Problem 3-15 Federal Dam Project

Farmers who live in a certain valley suffer from periodic flooding on their property. They ask the Federal Government to build a dam upstream on a river that will help to prevent the flooding. The cost of this project will be paid by the farmers at no interest over a period of years. The cost is $300/acre. If a farm has 100 acres, $30,000 is to be repaid. No payments are made for the first five years. Then, $1,000 is to be paid at the end of each year for 30 years to pay off the $30,000. Is the farmer receiving a subsidy? Why? If the interest is 10%, what is the approximate capitalized value of the subsidy, if any? Build an Excel worksheet in the form of an amortization table showing all calculations.