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1. A dam is proposed on a stretch of wild river, a river that is currently used for recre- ation. The dam will generate electricity. The dam will have a useful life of 50 years, after which its reservoir will be full of sediment and the dam will need to be removed. The following are characteristics of the dam: Initial Cost: $100,000,000 odb Electricity produced: 100,000 MWh per year, @ $100/Mwh. Cost of decommissioning dam: $10,000,000. Value of recreation lost: $5,000,000 per year a. If the social discount rate is 3% per year, is the dam a good idea? b. If the social discount rate is 10% per year, is the dam a good idea? 192 C. Calculate the "cutoff" discount rate, c, such that the dam is a good idea for dis- count rates c. 2. You are the mayor of the small town of Wasilla and a landowner has offered to sell you 1,000 hectares of woodland for $2,000,000. You are very tempted because of the

1. A dam is proposed on a stretch of wild river, a river that is currently used for recre- ation. The dam will generate electricity. The dam will have a useful life of 50 years, after which its reservoir will be full of sediment and the dam will need to be removed. The following are characteristics of the dam: Initial Cost: $100,000,000 odb Electricity produced: 100,000 MWh per year, @ $100/Mwh. Cost of decommissioning dam: $10,000,000. Value of recreation lost: $5,000,000 per year a. If the social discount rate is 3% per year, is the dam a good idea? b. If the social discount rate is 10% per year, is the dam a good idea? 192 C. Calculate the "cutoff" discount rate, c, such that the dam is a good idea for dis- count rates c. 2. You are the mayor of the small town of Wasilla and a landowner has offered to sell you 1,000 hectares of woodland for $2,000,000. You are very tempted because of the

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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1. A dam is proposed on a stretch of wild river, a river that is currently used for recre- ation. The dam will generate electricity. The dam will have a useful life of 50 years, after which its reservoir will be full of sediment and the dam will need to be removed. The following are characteristics of the dam: Initial Cost: $100,000,000 odb Electricity produced: 100,000 MWh per year, @ $100/Mwh. Cost of decommissioning dam: $10,000,000. Value of recreation lost: $5,000,000 per year a. If the social discount rate is 3% per year, is the dam a good idea? b. If the social discount rate is 10% per year, is the dam a good idea? 192 C. Calculate the "cutoff" discount rate, c, such that the dam is a good idea for dis- count rates<c and a bad idea for discount rates > c. 2. You are the mayor of the small town of Wasilla and a landowner has offered to sell you 1,000 hectares of woodland for $2,000,000. You are very tempted because of the
Transcribed Image Text:1. A dam is proposed on a stretch of wild river, a river that is currently used for recre- ation. The dam will generate electricity. The dam will have a useful life of 50 years, after which its reservoir will be full of sediment and the dam will need to be removed. The following are characteristics of the dam: Initial Cost: $100,000,000 odb Electricity produced: 100,000 MWh per year, @ $100/Mwh. Cost of decommissioning dam: $10,000,000. Value of recreation lost: $5,000,000 per year a. If the social discount rate is 3% per year, is the dam a good idea? b. If the social discount rate is 10% per year, is the dam a good idea? 192 C. Calculate the "cutoff" discount rate, c, such that the dam is a good idea for dis- count rates<c and a bad idea for discount rates > c. 2. You are the mayor of the small town of Wasilla and a landowner has offered to sell you 1,000 hectares of woodland for $2,000,000. You are very tempted because of the
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