A public project with social discount rate of 6% has determined that its initial costs will be spread out over the first 2 years of construction. They will be $10,000,000 in year 0, $15,000,000 in year 1, and $5,000,000 in year 2. Beginning in year 3 and continuing until year 22, the project will have an annual operating expense of $1,000,000. In addition, the city government sponsoring the project will receive $100,000 per year in revenue because of the project. The private businesses in the area expect to gain $4,000,000 per year in new business because of the project in years 3 - 22. However, the construction will disrupt several local business during year 1 and 2 resulting in a loss of $750,000 per year during those two years for those businesses.

What is the present worth of the net benefits/disbenefits in this project?

What is the present worth of the net costs/revenues in this project?

What is the Benefit/Cost Ratio of this project?

Should the project be accepted?