Peter45
Apr 5, 2011, 08:47 PM
Suppose Congress is considering removing a dam. It would cost $3 Billion to remove,
which would all occur this year (t=0). Beginning this year (t=0) and for every year there-
after, annual benefits will equal $200 Million.
a) If the discount rate is 10%, should the dam be removed?
b) If the discount rate is 5%, should we remove the dam?
c) For what discount rate would Congress be indifferent (i.e. Costs = Net Present Value
of Benefits)?
please show work
which would all occur this year (t=0). Beginning this year (t=0) and for every year there-
after, annual benefits will equal $200 Million.
a) If the discount rate is 10%, should the dam be removed?
b) If the discount rate is 5%, should we remove the dam?
c) For what discount rate would Congress be indifferent (i.e. Costs = Net Present Value
of Benefits)?
please show work