Government is considering whether to replant trees in a previously clear$-$cut forest on Crown

$($government owned$)$ land in Northwestern Ontario. In $40$ years, the market value of the trees

is estimated to be $$14$ million, and costs of planting are estimated to be $$2$ million for $3$ years

starting at t $=0.$ To simply our analysis, we assume no forest maintenance costs in subsequent

years. Benefits from a restored habitat for endangered wildlife are estimated to be $$1$ million

each year from years $30$ to $40.$ These non$-$market benefits are expected to accrue for many

more years assuming sustainable forestry practices such as selective harvesting but again for

simplicity we consider a shorter period.

Use the Excel template provided to find the answers to the questions $($a$),($b$)$ and $($c$)$ below.

a$.$ Using a discount rate of $4\%,$ find the PV of benefits. Keep $7$ digits in all values $-$ for example,

$2\mathrm{.}874756$ or $0\mathrm{.}836487$ etc.

b$.$ Using a discount rate of $4\%,$ find the PV of costs. Keep $7$ digits in all values.

c$.$ Determine the net present value of the tree planting project.

d$.$ Based only on your NPV calculation, should this project proceed? Explain.

e$.$ If this project is not feasible at $4\%,$ how much higher must the market value of the replanted

trees be in year $40$ to make it feasible?

f$.$ Identify at least $2$ other nonmarket benefits of the forest restoration project.

g$.$ Identify at least $3$ stakeholder groups that should be considered when conducting this BCA