Question
Consider a proposal to invest $8.55 million into a stretch of wild river preservation in Wyoming. The project would require periodic capital expenditures as well
Consider a proposal to invest $8.55 million into a stretch of wild river preservation in Wyoming. The project would require periodic capital expenditures as well as annual maintenance expenditures. Benefits from river restoration range from current recreational use to flood prevention to potential future fishing and floating benefits as well as societal benefits from knowing wild stretches of river exist and will be passed on to future generations. Following current best practices for benefit estimation, the following set of costs and benefits are reported for the project.
Year | Time Period | Capital Costs | Maintenance Costs | Recreation Benefits | Flood Prevention Benefits | Reserve the right to fish the river benefits | Reserve the right to float the river benefits | Benefits from knowledge the stretch of river system is preserved | Benefits from leaving preserved river system to future generations |
1 | 0 | $550,000 | $50,000 | $5,000 | $75,000 | $80,000 | $45,000 | $175,000 | $85,000 |
2 | 1 | $550,000 | $75,000 | $7,500 | $75,000 | $82,500 | $46,000 | $180,000 | $87,500 |
3 | 2 | $0 | $100,000 | $10,000 | $75,000 | $85,000 | $47,000 | $185,000 | $90,000 |
4 | 3 | $0 | $125,000 | $12,500 | $75,000 | $87,500 | $48,000 | $190,000 | $92,500 |
5 | 4 | $0 | $150,000 | $15,000 | $75,000 | $90,000 | $49,000 | $195,000 | $95,000 |
6 | 5 | $350,000 | $175,000 | $17,500 | $75,000 | $92,500 | $50,000 | $200,000 | $97,500 |
7 | 6 | $350,000 | $200,000 | $20,000 | $125,000 | $95,000 | $51,000 | $205,000 | $100,000 |
8 | 7 | $0 | $225,000 | $20,000 | $125,000 | $97,500 | $52,000 | $210,000 | $102,500 |
9 | 8 | $0 | $250,000 | $20,000 | $125,000 | $100,000 | $53,000 | $215,000 | $105,000 |
10 | 9 | $0 | $275,000 | $20,000 | $125,000 | $102,500 | $54,000 | $220,000 | $107,500 |
11 | 10 | $250,000 | $300,000 | $20,000 | $125,000 | $105,000 | $55,000 | $225,000 | $110,000 |
12 | 11 | $250,000 | $325,000 | $20,000 | $125,000 | $107,500 | $56,000 | $230,000 | $112,500 |
13 | 12 | $0 | $350,000 | $30,000 | $125,000 | $110,000 | $57,000 | $235,000 | $115,000 |
14 | 13 | $0 | $375,000 | $30,000 | $125,000 | $112,500 | $58,000 | $240,000 | $117,500 |
15 | 14 | $0 | $400,000 | $30,000 | $175,000 | $115,000 | $59,000 | $245,000 | $120,000 |
16 | 15 | $250,000 | $425,000 | $30,000 | $175,000 | $117,500 | $60,000 | $250,000 | $122,500 |
17 | 16 | $250,000 | $450,000 | $30,000 | $175,000 | $120,000 | $61,000 | $255,000 | $125,000 |
18 | 17 | $0 | $475,000 | $30,000 | $175,000 | $122,500 | $62,000 | $260,000 | $127,500 |
19 | 18 | $0 | $500,000 | $50,000 | $175,000 | $125,000 | $63,000 | $265,000 | $130,000 |
20 | 19 | $0 | $525,000 | $50,000 | $175,000 | $127,500 | $64,000 | $270,000 | $132,500 |
Assume the discount rate is 8%. Complete the following table using all reported benefits.
1. Discounted present value of net benefits
2. Discounted present value of costs
3. Discounted present value of benefits
4. Benefit-Cost Ratio
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started