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4. Consider a public project with a forecast period of 20 years. The discount rate is 3.5%. The net benefit in year 20 is forecast
4. Consider a public project with a forecast period of 20 years. The discount rate is 3.5%. The net benefit in year 20 is forecast to be 10. You expect that each year from year 20, conditional on making it to year 20, there is only an 80% chance of continuing another year. Net benefits grow 2% per year as long as the project continues. a) What discount factor (8) would you use to calculate the horizon value for this indefinite continuation situation? b) What is the horizon value? 4. Consider a public project with a forecast period of 20 years. The discount rate is 3.5%. The net benefit in year 20 is forecast to be 10. You expect that each year from year 20, conditional on making it to year 20, there is only an 80% chance of continuing another year. Net benefits grow 2% per year as long as the project continues. a) What discount factor (8) would you use to calculate the horizon value for this indefinite continuation situation? b) What is the horizon value
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