Question
You are a town planner considering turning an abandoned area into a public park in your community. Getting the site cleared up would cost $750,000
You are a town planner considering turning an abandoned area into a public park in your community. Getting the site cleared up would cost $750,000 upfront, / landscaping and benches for the park would cost $1.25 million in year 1, / and playground equipment would cost $200,000 in year two. / The park would be ready for use at the beginning of year 3, at which point it would provide $90,000 in social value to the community every year, forever.The current interest rate is 9%, and the social discount rate is 3%
FV= 750,000 X (1+0.09) = 817, 500
Use the following steps, and the equations for present value from the module notes to calculate the present value of the total costs of the park project:
Year zero costs = _ $750,000______ (1 pt)
Year 1 costs at present value = _________ (1 pt)
Year 2 costs at present value = _________ (1 pt)
Add the three answers above together to get the present value of the total costs of this park project _____________ (1 pt)
Use the following steps to calculate the present value of the total benefits of the park project:
Using the given social discount rate, what is the annual benefit of the park once it becomes usable _________ (1 pt)
What is the present value of this benefit ________ (1 pt)
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