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The Army Corps of Engineers is planning a new dam project that will provide electricity valued at $30 million per year for 40 years. The

The Army Corps of Engineers is planning a new dam project that will provide electricity valued at $30 million per year for 40 years. The cost to build it will be $1 billion. Budget analysts who prepared an analysis of the project used a discount rate of 2.66% (based on 10 year Treasury note rates) and found a negative present value for the project. Analysts from Bechtel Corp. which will have the contract to build the project if approved, used a discount rate of 0.12% (based on 1 year treasury bill rates) and a positive present value for the project. Explain what a discount rate represents and why it is important. Then explain why it makes such a difference in a case like this. Pick one of the discount rates and explain why it is the most correct of the two.

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