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(20%) 2. (B/C, inflation & trash) Beirut Municipality is considering two proposals regarding the disposal of trash. The municipality estimates that the real interest rate
(20%) 2. (B/C, inflation & trash) Beirut Municipality is considering two proposals regarding the disposal of trash. The municipality estimates that the real interest rate is 10% per year and the inflation rate is 5.45% per year. Both proposals will generate 55 million per year in benefits estimated in today's money. Proposal A has an initial cost of $25 million, M&O costs of S1 million per year and disbenefits of S1 million per year, all estimated in future dollars. Proposal B has an initial cost of $15 million, M&O costs of $1.5 million per year and disbenefits of $1.5 million per year, all estimated in future dollars. Both proposals can be stopped at any point in time with no financial consequences. The municipality is interested in a study period of 15 years. Based on benefit/cost ratio analysis, which proposal(if any) 'should Beirut Municipality chooses? (20 points)
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