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B.2. For each of the following situations, either calculate the required value or provide an explanation of how one might arrive at the valuation of
B.2. For each of the following situations, either calculate the required value or provide an explanation of how one might arrive at the valuation of the particular environmental good or particular policy change. (a) A small company is considering investment in a green power project at time t 0. The project is forecast to have a net present value (t = 0) of $3 million based on costs and revenues planned for t 1 through t = 20. The company has just been informed by the reg- ulatory authority that the company will be responsible for decom- missioning the power facilities at the end of the life of the project. The costs associated with decommissioning are C = $7.5 million at t = 21. Determine whether this project should still be under- taken if the discount rate used discount all costs and benefits is 5%. Provide a brief explanation of how the answer might change if r = 10%. (5 marks) r = B.2. For each of the following situations, either calculate the required value or provide an explanation of how one might arrive at the valuation of the particular environmental good or particular policy change. (a) A small company is considering investment in a green power project at time t 0. The project is forecast to have a net present value (t = 0) of $3 million based on costs and revenues planned for t 1 through t = 20. The company has just been informed by the reg- ulatory authority that the company will be responsible for decom- missioning the power facilities at the end of the life of the project. The costs associated with decommissioning are C = $7.5 million at t = 21. Determine whether this project should still be under- taken if the discount rate used discount all costs and benefits is 5%. Provide a brief explanation of how the answer might change if r = 10%. (5 marks) r =
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