Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 34

In 2011, El Paso Water Utilities (EPWU) issued bonds worth $9.125 million to improve the Van Buren dam in central El Paso and to finance three other drainage projects. The bonds were purchased by the Texas Water Development Board under the federal stimulus program wherein EPWU did not have to pay any dividend on the bonds. If the bond dividend rate would have been 4% per year, payable quarterly, with a bond maturity date 18 years after issuance, what is the present worth of the dividend savings to EPWU rate payers Assume the market interest rate is 6% per year.