CVC is considering subsidizing large$-$scale pine plantations by private landowners who own the surrounding denuded hillsides. Colombian hydrologists have estimated that an initial subsidy of $$1\mathrm{.}5$ million at the time of construction will extend the life of the project by $10$ years. What is the present value of this additional investment at $4\%$ and $7\%?$ Should the planting subsidy be provided?

Q$2.$Near the Sawtooth Mountains in central Idoho, the town of Stanley is looking at developing its geothermal resources. In part this is to make the long, cold winters pass a bit more comfortably $($hot tubs for everyone!$),$ but it is also intended to be the main heating source for the town. Stanley isnt very wealthy, so is looking at developing the geothermal energy and paying for it over $30$ years. At the end of $30$ years the system will be junk, worth nothing. The data for the project are indicated in the Table below. Note that all values are in nominal dollar terms $($actual market values$),$ initially valued in the end of year zero dollars, and increasing at the rate of x$\%$ per year in nominal terms. The inflation rate is $2\%$ per annum. All annual values accrue at the end of each year.$($a$).$ What is the net present value of the investment at $5\%$ and $10\%($these discount rates are in real terms.$)?($b$).$ The town is planning to finance the fixed costs by borrowing. What does the town need to charge annually to its $1,000$ year$-$round residents to pay off the fixed costs?$($c$).$ A conservation group dedicated to clean rivers is concerned that discharges of spent or unused geothermal water into the local stream will decimate trout populations. They point out that the data in the table do not reflect this environmental loss. Net tourism benefits from trout fishing during year zero $($at the beginning of year $1)$ can be conservatively estimated at $$50,000,$ and tourism net$-$benefits have historically been increasing at the rate of $5\%$ per annum. If the project planners take this additional annual loss into account, what is the NPV of the project at $5\%$ and $10\%?$ Benefit and Cost: Benefits:Annual savings in heating expenses: initial value$=200,000,$ increasing at $5\%$ per year.Tax revenue increase: Initial value $100,000,$ rising at $5\%$ per year, nominal. Operating Costs:Annual labor costs: initial value$=150,000,$ rising at $2\%$ per year.Annual energy costs $($for running pumps, etc.$)$: initial value$=25,000,$ increasing at $5\%$ per year.Annual maintenance expenses: initial value$=10,000$ per year, increasing at $5\%$ per year.Annual insurance costs: initial value$=1000,$ increasing at $2\%$ per year.Fixed costs:Equipment purchase: $100,000$Equipment installation: $100,000$Building construction costs: $75,000$Licensi