In order to prevent the damage that comes from the accumulated stock of a pollutant, the government of Lake Ekie is considering a phosphorous abatement program to prevent the loss of fish life and recreational activities. Their chief engineer argues for a longer 4-year project. The cost of such a program is $250,000 now and $250,000 at the end of years 1, 2, 3 and 4. The benefit (prevention of loss) is $100,000 now, $198,000 at the end of year 1, $296,000 at the end of year 2, and $380,000 at the end of year 3, and $476,000 at the end of year 4. Assuming a social discount rate of 5%, what is the NPV of the project, and should it be undertaken?

0 votes
    The net benefit is $180,498 and the project should not be undertaken.
     The net benefit is $200,000 and the project should be undertaken.
     The net benefit is $140,429 and the project should be undertaken.
     The net benefit is -$200,000 and the project should not be undertaken.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

0 votes
The net benefit is $140,429 and the project should be undertaken.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

Related questions




...