The Government of Everland is contemplating the construction of a dam, which has a useful life of 15 years. It takes two years for the construction to be completed at a capital cost are $550,000 per year. Upon construction, the annual maintenance costs are $60,000. The dam will produce 7 million units of electricity annually, which can be sold to consumers at 6 cents per unit. In addition, the dam can serve as a tourism destination attracting 30,000 tourists on an annual basis. The government intends to charge a $3 entry fee per visitor.

1. Calculate the net present value of this project using 3% discount rate and the benefit-cost ratio. Should the government undertake this project? Justify your answer. (2 points)

2. At the beginning of year 5, the government decides that some of the dams water can be used for the irrigation of nearby sugarcane fields. The cost of constructing a pipeline is $ 3 million and it takes one full year for the construction to be completed (assume that the costs are incurred on the last day of year 5 or the first day of year 6). Irrigated fields produce an additional 30000 tons of sugarcane that can be sold at 30 cents per ton. Calculate the revised net present value of this project. Should the government undertake this project? Justify your answer 2 points)

Assume that a 500-megawatt coal-based electricity plant pours into the atmosphere 20,000 tons of sulfur dioxide, which causes acid rain, 10,200 tons of nitrogen oxide that leads to smog, 700 tons of carbon monoxide per year. Annual external health costs include $59/ton for nitrogen oxide $29/ton for fine particulates $28/ton for sulfur dioxide $0.49/ton for carbon monoxide costs $2 million to build and $450,000 each year to operate it. The plant creates an aggregate economic benefit of $900,000 each year starting from the second year as the first year is used up building the facility.

1. Apply cost-benefit analyses if the investment makes economic sense with 15-year useful life of the electricity plant and 7% discount rate without considering the environmental cost.(2 points).

2. Consider the environmental costs and run cost-benefit analyses and discuss how it affects the economic sensibility of the investment.(2 points)

3. Will the investment make economic sense with 15-year useful life of the electricity plant and 3% discount rate when considering the environmental costs.(2 points)