Question
The stream of costs and benefits associated with two proposed natural resource projects in Prince Edward Island are presented in the tables below: Project PEI-Sweet
The stream of costs and benefits associated with two proposed natural resource projects in Prince Edward Island are presented in the tables below:
Project PEI-Sweet Beach
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Costs | $4,000,000 | $2,000,000 | $1,000,000 | $0 |
| Benefits | $7,000,000 | $8,000,000 | $8,000,000 | $8,000,000 |
Project PEI-Recreational Watershed
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Costs | $6,000,000 | $4,000,000 | 2,000,000 | $0 |
| Benefits | $12,000,000 | $9,500,000 | $8,000,000 | $6,000,000 |
- If the interest rate is 10%, use an Excel file to compute the net present values (NPV) of the two projects. Report your NPV results below
NPV for Project PEI Sweet Beach =
| |
NPV for PEI-Recreational Watershed =
|
2. If the interest rate is 10%, which project would you advise the PEI government to implement and why?
3. If the interest rate is 5%, use an Excel file to compute the net present values (NPV) of the two projects. Report your NPV results below
NPV for Project PEI Sweet Beach =
| |
NPV for PEI-Recreational Watershed =
|
4. If the interest rate is 5%, which project would you advise the PEI government to implement and why?
Step by Step Solution
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Step: 1
To calculate the Net Present Value NPV of each project we need to discount the costs and benefits of ...
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Practical Management Science
Authors: Wayne L. Winston, Christian Albright
5th Edition
1305631540, 1305631544, 1305250907, 978-1305250901
