Officials of the government involved in funding the project are of the opinion that the direct health benefits are too subjective to be included and that the analysis should be limited to the production benefits alone. If so, a) What is the net present value of the project? Assume a 15% discount rate. Would this project be undertaken? (4 Marks) b) What is the net present value of the project using a 10% discount rate. Would this project be undertaken? (4 Marks) c) To the nearest percentage point, what is the internal rate of return of the project? (That is to say, the discount rate for which net present value is 0.) (2 Marks) Suppose, though, that Health officials successfully argue that enhancing health of the population is a c) What now is the net present value of the project, using a 10% discount rate? What is the internal rate of return? (4 Marks) f) Clearly, the return on this investment depends heavily on wherther pr not the estimates of direct health benefits and on how these estimates are made. What about the estimates of production benefits? How likely is it that the figures above would be reasonably accurate for this country? (3 Marks) g) What special problems do developing countries face with respect to the choice of discount rate? (3 Marks) Officials of the government involved in funding the project are of the opinion that the direct health benefits are too subjective to be included and that the analysis should be limited to the production benefits alone. If so, a) What is the net present value of the project? Assume a 15% discount rate. Would this project be undertaken? (4 Marks) b) What is the net present value of the project using a 10% discount rate. Would this project be undertaken? (4 Marks) c) To the nearest percentage point, what is the internal rate of return of the project? (That is to say, the discount rate for which net present value is 0.) (2 Marks) Suppose, though, that Health officials successfully argue that enhancing health of the population is a c) What now is the net present value of the project, using a 10% discount rate? What is the internal rate of return? (4 Marks) f) Clearly, the return on this investment depends heavily on wherther pr not the estimates of direct health benefits and on how these estimates are made. What about the estimates of production benefits? How likely is it that the figures above would be reasonably accurate for this country? (3 Marks) g) What special problems do developing countries face with respect to the choice of discount rate
