Table 6.4 shows cost and benefit flows of two public infrastructure projects. Use a 5 percent discount rate to compute the NPV for both projects (NPV should be a simple number).

Answers:

1) NPV for project A

2) NPV for project B

2. Recalculate the NPV for both projects with a 10 percent discount rate (NPV should be a simple number).

Answers:

1) NPV for project A

2) NPV for project B

3. Write a paragraph to discuss the economic feasibility of the two projects

Project A	Personal Cost	Operating Cost	Capital Cost	Benefit
0	$ 300,000	$ -	$ 200,000	$ -
1	$ 150,000	$ 2,000	$ 100,000	$ -
2	$ 100,000	$ 15,000	$ 25,000	$ 30,000
3	$ -	$ 21,000	$ -	$ 150,000
4	$ -	$ 21,000	$ -	$ 200,000
5	$ -	$ 21,000	$ -	$ 200,000
6	$ -	$ 21,000	$ -	$ 200,000
7	$ -	$ 21,000	$ -	$ 200,000
8	$ -	$ 25,000	$ -	$ 200,000
9	$ -	$ 25,000	$ -	$ 200,000
10	$ -	$ 25,000	$ -	$ 200,000
Project B	Personal Cost	Operating Cost	Capital Cost	Benefit
0	$ 500,000	$ -	$ 125,000	$ -
1	$ 100,000	$ 12,500	$ 25,000	$ 187,500
2	$ -	$ 25,000	$ -	$ 187,500
3	$ -	$ 25,000	$ -	$ 187,500
4	$ -	$ 25,000	$ -	$ 187,500
5	$ -	$ 25,000	$ -	$ 187,500
6	$ -	$ 25,000	$ -	$ 187,500
7	$ -	$ 25,000	$ -	$ 187,500
8	$ -	$ 25,000	$ -	$ 187,500
9	$ -	$ 25,000	$ -	$ 187,500
10	$ -	$ 25,000	$ -	$ 187,500