Suppose an agency has conducted the CBA for three alternative projects. The results of the CBAs are reported in the following table in millions of Euros:

Consider that Group A contains households with an annual income over EUR 20,000 and Group consists of households with an annual income under EUR 20,000.
Which of the projects should be funded if one looks at the total NPV? For which of the projects might distributional considerations be an issue? Recompute the total NPV for the projects using a distributional weight of 1 for Group A and a weight of 1.5 for Group B. Which projects should be funded if these distributional weights are applied?

Transcribed Image Text:

Project Project 1 Project 2 Project 3 NPV overall NOT 6 -1 NPV Group A 2 -4 NPV Group B 0 -1