(a) Calculate the present value ofnet benefitsof the timber extraction after 4 years. (b)(b) Due to an increase of immigration to the Incomappleux Valley because of its naturalbeauty, the population is supposed to increase from 200 to 750 over the next 4 years.This increase in population causes a 63% increase in the cost of timber extraction fromthe initial cost of 50 (assume benefits stay at a constant 80). Calculate the annualgrowth rate of the population and calculate the new cost of timber extraction. In 4years, with the new population in mind, should the timber extraction continue?

s).pdf _ Download A Alternative form Page 2 of 7 ZO Problem 1 (3 points) A section of old growth forest in the Incomappleux Valley can be extracted in order to supply wood for 200 people. Assume the total cost of the timber extraction is $50 and the total benefit resulting from the timber extraction is $80 (units are in thousands of dollars). These benefits and costs occur in a stream over four years at a discount rate of 7%, where discounting begins in the first year. (a) Calculate the present value of net benefits of the timber extraction after 4 years. Hint: The present value (PV) of a stream of benefits (B) or costs (C) received in n years at the discount rate r is: PV [ Bo, ..., Bn] = Zio ( 1+7) PV [Co, ..., Cn] = Zio ( 1+7) (b) Due to an increase of immigration to the Incomappleux Valley because of its natural beauty, the population is supposed to increase from 200 to 750 over the next 4 years. This increase in population causes a 63% increase in the cost of timber extraction from the initial cost of 50 (assume benefits stay at a constant 80). Calculate the annual growth rate of the population and calculate the new cost of timber extraction. In 4 years, with the new population in mind, should the timber extraction continue? econ483 sylla....doc transcript.txt hw5.pdf DE HW_ch05 (1).doc