Economic Valuation of Cement Project.

A cement project is planned for Country X. Country X has an OECD risk rating of 5 out of 7, ILO employment multiplier factor of 9, informal sector 30%, and temporary jobs are estimated at 15%. The LIBOR rate is 0.987%/yr. Also, cement is subsidized at 40%, the cement FOB price is $200/ton and cement CiF price is $230/ton. The project NPV has financial cement price of $150/ton. The project will employ 78 workers directly. The World Bank reports that Country X s GDP composition by sector is 10% agriculture, 60% industry, and 30% services, whereas GDP composition by employment is 30% agriculture, 20% industry, and 50% services. Cement is classified as an industrial product. Country Xs PPP GDP per capita is $27,750 per year.

Given the above information, find the following:

1. the true unsubsidized price of cement

2. the shadow price of cement using economic approach

3. explain whether cement is exportable or importable commodity

4. the shadow discount rate

5. the shadow wage rate of cement workers in Country X

6. total employment generation from this cement project