A small hydro dam supplying electricity to 10,000 households has just been constructed that has cost $30,000,000 to build with a life expectancy of 60 years. Annual maintenance costs are $500,000 and extensive renovations of $5, 000, 000 are expected every 15 years. If the interest rate is 7 %/year, how much will each household be charged per year so that the costs of the project are recovered?

A small hydro dam supplying electricity to 10,000 households has just been constructed that has cost $30,000,000 to build with a life expectancy of 60 years. Annual maintenance costs are $500,000 and extensive renovations of $5, 000, 000 are expected every 15 years. If the interest rate is 7 %/year, how much will each household be charged per year so that the costs of the project are recovered?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Real Estate

Real estate means ownership of land along with the assets and natural resources that exist on the land. These properties are in real/physical form which is tangible. Real estate simply means land or addition made to land permanently like constructing a residence or different buildings. People invest in real estate to either reside or for wealth creation. Many people investing in real estate further lend the place for occupation or businesses in return for a monthly payment.

Question

100%

A small hydro dam supplying electricity to
10,000 households has just been constructed that has
cost $30,000,000 to build with a life expectancy of 60
years. Annual maintenance costs are $500,000 and
extensive renovations of $5, 000, 000 are expected
every 15 years. If the interest rate is 7 %/year, how
much will each household be charged per year so that
the costs of the project are recovered?

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