Question
A county is considering using a piece of park land for one of two alternative recreation projects. Project A would require construction costs of $2
A county is considering using a piece of park land for one of two alternative recreation projects. Project A would require construction costs of $2 million (year 0) and generate net benefits of $500,000 per year for 10 years. (Assume the benefits are realized at the ends of years 1 through 10).At the end of its life, project A will have a salvage value of $300,000. Project B would require construction costs of $8 million and generate net benefits of $1 million per year for 20 years.At the end of its life, project B will have a salvage value of $500,000.(Assume the benefits are realized at the ends of years 1 through 20). If these figures are in real dollars, and the real discount rate is 6 percent, which project would the county select?
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Given Real discount rate 6 Project A Initial investment 2 million Annual net benefits 500000 for 10 ...Get Instant Access to Expert-Tailored Solutions
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