The World Bank is considering an application from the country of Equatoria for a large dam project. Some costs and benefits of the project (dollar values) are as follows:

Construction costs: $500 million/year for three years

Operating costs: $50 million/year

Hydropower to be generated: 3 billion Kilowatt hours/year

Price of electricity: $0.05/Kilowatt hour

Irrigation water available from the dam: 5 billion gallons/year

Price of water: $0.02/gallon

Agricultural product lost from flooded lands: $45 million/year

Forest products lost from flooded lands: $20 million/year

There are also additional, less easily quantifiable, losses: human costs to villagers who will be forced to move, watershed damage, and ecological costs of habitat destruction. It is also possible that the new lake are may contribute to the spread of water-borne diseases.

an alternative project: a number of smaller dams constructed so as not to flood significant agricultural or forest lands. For this project, total construction costs are exactly half the costs of the big dam project, and power/irrigation benefits are also half as much. But there is no damage to farmland or forest, and there are no ecological or resettlement costs.

a. Do a complete cost-benefit analysis of the alternative project if the interest rate is 10%.

b. Do a complete cost-benefit analysis of the alternative project if the interest rate is 5%.

For each scenario (a. to b.), indicate a definite yes, definite no, or uncertain result (25 points

Complete the Data summary (for each scenario analyzed)

Costs	PV	Benefits	PV
Construction	$?	Hydro Power	$?
Operation	$?	Irrigation Water	$?
Flooded Ag	$?	Total PV of Benefits	$?
Flooded Forests	$?
Total PV of Costs	$?
Net Benefits (NPV)
NB=PVB - PVC	?
Discount Rate	?%
n	?	useful life time of the dam (after construction)
Current Value	CV(annual)
Costs
Construction	$?
Operation	$?
Flooded Ag	$?
Flooded Forests	$?
Benefits
Hydro Power	$?
Irrigation Water	$?