This exercise considers a simplified cost-benefit analysis of whether a new housing de- velopment in the Thames Gateway in London should be required to install sprinklers in all dwellings. Use the spreadsheet Cost-Benefit-Sprinklers.xlsx to for this exercise. The analysis is based in part on parameters from a cost-benefit analysis published by the Department for Communities and Local Government in February 2010. The analysis esti- mates the costs and benefits of fitting a representative dwelling in this new development with sprinklers.

What benefit-cost ratio do you obtain if there were no annual maintenance costs? What is the intuition behind this result?

How high would the value of a statistical life approximately have to be to generate a benefit-cost ratio of one?