Explore BrainMass
Share

Explore BrainMass

    Economic III-4

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A cost-benefit analysis of a new irrigation project indicates that the net benefits = Benefit - Cost (B-C) of the project in each year will be $20 million. This project will yield benefits for 10 years. Calculate the present value of benefits minus costs when the social rate of discount is 10%. Does the program merit approval? How would the present value of the net benefits change if the social rate of discount were 15%? You can use spreadsheet software, such as MS Excel, to do the calculation. After that, copy and paste it into a MS Word document, write your answer in the MS Word document, and upload it to Blackboard.

    © BrainMass Inc. brainmass.com October 10, 2019, 5:09 am ad1c9bdddf
    https://brainmass.com/economics/finance/cost-benefit-analysis-new-irrigation-495000

    Solution Preview

    Please see the attached file

    Discount Rate 10%

    Year Benefit (MM) PV (MM)
    1 $ 20.00 $ 18.18
    2 $ 20.00 $ 16.53
    3 $ 20.00 $ 15.03
    4 $ 20.00 $ 13.66
    5 $ 20.00 $ 12.42
    6 $ 20.00 $ 11.29
    7 $ 20.00 $ 10.26
    8 $ 20.00 $ 9.33
    9 $ 20.00 $ 8.48
    10 $ 20.00 $ 7.71
    $ 122.89 <- npv

    Discount Rate 15%

    Year Benefit (MM) PV (MM)
    ...

    Solution Summary

    The cost benefit analysis for new irrigations are examined.

    $2.19