188 MULTIPLE PURPOSE RIVER DEVELOPMENT 



Given these alternatives, the estimated annual costs and benefits 

 under federal operation would appear as shown in Table 32. As 

 between the two alternatives, Plan II is shown to be economically 

 justified, as the increment of over $2 million in annual benefits 

 more than compensates for the increment in cost, when costs are 

 based on an imputed interest rate of 2.5 per cent, 



TABLE 32. Assumed Alternative Plans of Public Development for Howell 

 Mill Shoals, Assuming Interest Rate of 2.5 Per Cent 



Plan 1 Plan II 



($ thousand) ($ thousand) 



Investment 68,872 97,772 



Annual costs: 



Interest and amortization 1,881 2,670 



Interim replacements 112 146 



Payment in lieu of taxes 344 489 



Operation and maintenance 174 188 



Total 2,511 3,493 



Increment in costs of II over I 982 



Annual benefits: 



Power 2.677 4,310 



Flood control 424 



Total 2,677 4,734 



Increment in benefits of II over I 2,057 



Incremental benefit — cost ratio 2.09:1 



Source: Data contained above is based on Corps of Engineers, U. S. Army, 

 Mobile, Alabama, Howell Mill Shoals Dam, Report on Preliminary 

 Height of Dam Study, August 1954. 



We know, however, that investment funds are not available to a 

 private utility at 2.5 per cent. A certain proportion of the invest- 

 ment funds can be obtained from borrowing at long-term rates of 

 about 3.5 per cent; some funds will be available in exchange for 

 preferred equity shares at rates of between 4 and 5 per cent; and 

 the remainder will have to come from common stock and earnings 

 retained in the enterprise. Since the latter bear the risk in the 



