The Headless Valley Water Control Board (HVWCB) will undertake an irrigation project which will provide 10 million gallons of water annually to 100 wheat farms of 100 acres each. The HVWCB will charge $0.02 per gallon for the water, which will be distributed equally among the 100 farms.

It is assumed that:

Land rent in Headless Valley will rise by $70 per acre per annum;

50 farm labourers will be attracted to work on Headless Valley farms at the market wage of $2000 per annum, from the vineyards of nearby Sunshine Valley;

Current wheat yield is 5 tons per acre and expected to increase to 20 tons per acre after the irrigation project is completed.

Headless valley produces and exports wheat at a world market price of $10 per ton.

the irrigation infrastructure will cost $1 million;

The discount rate is 10%

Life span of the project is 15 years

Making other additional assumptions:

i)Estimate the NPV

ii)The benefit cost ratio

iii)Is the project feasible?