Assume that the government now has a choice between undertaking the project described in problem 1 and undertaking a larger project. If it

spends an additional $100,000, returns will be increased by $25,000 per year and disposal costs in the final year will increase by $20,000. Which project should be undertaken if the discount rate is 0? 10 percent? 15 percent? If there are two groups in the population, how are your answers affected if two-thirds of the incremental benefits go to the poor (with the incremental costs being shared equally, as before)?