determined that the total economic benefits of the river sites are $3.96 million whereas the reservoir generates $2.23 million annually (Bi, Borisova, and Hodges 2019). The annual costs of dam maintenance are around $160,000 ($0.16 million) (Wilson 2017). The costs of dam removal are highly variable, between $7 and $20 million; let us use a cost estimate of $15 million (15). Let us further assume that river maintenance will be around $50,000 in incidental expenses (50.05 million). As such, the benefits and costs associated with the two programs are as follows: Year River Restoration Benefits Costs 0 3.96 15 1 3.96 0.05 After year 1 3.96 0.05 Keep the Dam Benefits 2.23 2.23 Costs 0.16 0.16 0.16 2.23 Using a discount rate of 4%, determine the net present value of both projects valued over 20 years and in perpetuity. I In your final report, address the following questions: 1. If you were considering only year zero, which project would be preferred based on the values provided? Which project should be undertaken if you consider a time frame of 20 years? What if you consider the project into perpetuity? What role does time and your discount rate play in your decision making? Include a table displaying the results of your benefit cost analysis in your report. 2. What types of economic values are estimated using the travel cost methodology specific to benefits and construction costs associated with this case? What values are likely not included in the economic valuation estimates? What other approaches could you have used to estimate the values not included in the above estimates? Is it likely that it would have changed the outcomes of your benefit-cost analysis? determined that the total economic benefits of the river sites are $3.96 million whereas the reservoir generates $2.23 million annually (Bi, Borisova, and Hodges 2019). The annual costs of dam maintenance are around $160,000 ($0.16 million) (Wilson 2017). The costs of dam removal are highly variable, between $7 and $20 million; let us use a cost estimate of $15 million (15). Let us further assume that river maintenance will be around $50,000 in incidental expenses (50.05 million). As such, the benefits and costs associated with the two programs are as follows: Year River Restoration Benefits Costs 0 3.96 15 1 3.96 0.05 After year 1 3.96 0.05 Keep the Dam Benefits 2.23 2.23 Costs 0.16 0.16 0.16 2.23 Using a discount rate of 4%, determine the net present value of both projects valued over 20 years and in perpetuity. I In your final report, address the following questions: 1. If you were considering only year zero, which project would be preferred based on the values provided? Which project should be undertaken if you consider a time frame of 20 years? What if you consider the project into perpetuity? What role does time and your discount rate play in your decision making? Include a table displaying the results of your benefit cost analysis in your report. 2. What types of economic values are estimated using the travel cost methodology specific to benefits and construction costs associated with this case? What values are likely not included in the economic valuation estimates? What other approaches could you have used to estimate the values not included in the above estimates? Is it likely that it would have changed the outcomes of your benefit-cost analysis
