Need details explanation and calculation 1. Consider a situation where the state of Washington is trying to
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Need details explanation and calculation
1. Consider a situation where the state of Washington is trying to determine whether, due to budget issues, it should close down a state park. The cost of "decommissioning" the park -removing the campsite, restroom facilities, etc. -is $2.2 million incurred in the current year (year 0). On the other hand, the budgetary savings would be $100,000 every year for year 0, year 1 and year 2.
- From a purely budgetary perspective, should the park be closed down if the discount rate is 3%?
- Now suppose the annual benefit of the park to park visitors is $40,000 (including year 0, year1, and year2). In this case, what is the social net benefit of closing the park if the discount rate is 3%?
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