2. (75 points) Consider a case where a SRP is considering constructing another dam to generate...

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2. (75 points) Consider a case where a SRP is considering constructing another dam to generate hydropower along the CAP canal. This decision will create economic profits of $210,000/year to the company (which hires local workers) after one year of construction but will cost $1,000,000 (paid upfront in Year 0) to build. In addition, the increase in hydroelectric generation will reduce reliance on fossil fuels thus reducing the damages of pollution experienced by Phoenix from $40,000 per year to $20,000 per year. Assume that these benefits are experienced from the first (post-construction) year onward and are permanent. (a) (35 points) Assume that the discount rate is 1% (r=.04) and the evaluation horizon is the end of Year 12. Please neatly fill the blanks in the table below (assuming you are working from a social perspective and counting all costs and benefits). Time Benefits Costs Net Benefits Discounted Net Benefits 0 1 2 3 1 5 6 7 8 9 10 11 12 3 2. (75 points) Consider a case where a SRP is considering constructing another dam to generate hydropower along the CAP canal. This decision will create economic profits of $210,000/year to the company (which hires local workers) after one year of construction but will cost $1,000,000 (paid upfront in Year 0) to build. In addition, the increase in hydroelectric generation will reduce reliance on fossil fuels thus reducing the damages of pollution experienced by Phoenix from $40,000 per year to $20,000 per year. Assume that these benefits are experienced from the first (post-construction) year onward and are permanent. (a) (35 points) Assume that the discount rate is 1% (r=.04) and the evaluation horizon is the end of Year 12. Please neatly fill the blanks in the table below (assuming you are working from a social perspective and counting all costs and benefits). Time Benefits Costs Net Benefits Discounted Net Benefits 0 1 2 3 1 5 6 7 8 9 10 11 12 3