Two schemes of partial federal subsidy of public works projects have been used in the United States. In certain types of projects, outright grants have been made to local governmental units for a portion of the construction cost of approved projects, with the remainder of the cost to be repaid by the local units with interest over a period of years. For example, a grant of 30% might be made, with the remaining 70% to be paid at interest over a 20-year period. Another plan of subsidy has been to require the repayment of all the construction cost without any interest. This latter plan is suggested for a proposed college dormitory project. The government is asked to put up $2,000,000 for this project, with the college paying back this amount at $50,000 a year for 40 years. Assume that, all things considered, an appropriate interest rate to charge on such a "loan" is 6%. On this assumption, the plan to make the $2,000,000 repayment in 40 years without interest really amounts to a subsidy of how many dollars? Compare this to a 30% grant, with the remaining 70% of the $2,000,000 being paid back over 40 years at 6%. Which is better for the college? Explain Clearly Two schemes of partial federal subsidy of public works projects have been used in the United States. In certain types of projects, outright grants have been made to local governmental units for a portion of the construction cost of approved projects, with the remainder of the cost to be repaid by the local units with interest over a period of years. For example, a grant of 30% might be made, with the remaining 70% to be paid at interest over a 20-year period. Another plan of subsidy has been to require the repayment of all the construction cost without any interest. This latter plan is suggested for a proposed college dormitory project. The government is asked to put up $2,000,000 for this project, with the college paying back this amount at $50,000 a year for 40 years. Assume that, all things considered, an appropriate interest rate to charge on such a "loan" is 6%. On this assumption, the plan to make the $2,000,000 repayment in 40 years without interest really amounts to a subsidy of how many dollars? Compare this to a 30% grant, with the remaining 70% of the $2,000,000 being paid back over 40 years at 6%. Which is better for the college? Explain Clearly