Cost-Benefit Analysis

2. The state of Florida and its state parks have long been plagued by invasive species. Suppose that an invasive species-reduction policy that will be evaluated over a 3-year period is being considered by economists using benefit-cost analysis.

a. Assume that the estimated one-time cost (period 0) for this policy option is $155 000. Since the policy will be evaluated over time, assume a discount rate of 3%. The total value of a reduction in invasive species is assumed to be $54,900 for each of the 3 years (Year 1, Year 2 and Year 3). Determine the present net value (PNV) over the 3-year time period for this invasive-species policy. The table below will help guide your answers, where the initial year information is already given (you fill out the remainder of the table).

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b. Based on your calculation from part a., will the invasive-species-reduction policy be implemented? Briefly explain why or why not?

c. Describe how an economist could value the reduction in invasive species (i.e., improved environmental quality) using the contingent valuation method (CVM). Write briefly and to the point. List the steps of the CVM method and discuss the pros and cons of this method.

could on of y'all solve this practice problem? Thank you

| Benefit-Cost Table Year 0 Total | Benefit Cost NPV at 3% 155,000