Value of recreation lost: $20,000,000 per year a. If the social discount rate is a constant 2% per year, is the dam a good idea? Show your work and explain your rationale.
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A community is looking to build a dam over a stretch of river that is currently being used for recreation. 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 the characteristics of the dam:
Initial cost: $350,000,000
Electricity produced: 200,000 MWh per year at $150/MWh Value of recreation lost: $20,000,000 per year
a. If the social discount rate is a constant 2% per year, is the dam a good idea? Show your work and explain your rationale.
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- A community is looking to build a dam over a stretch of river that is currently being used for recreation. 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 the characteristics of the dam:Initial cost: $350,000,000Electricity produced: 200,000 MWh per year at $150/MWh Value of recreation lost: $20,000,000 per yea An electricity company is deciding whether or not to invest in electricity generation in the community. They expect the new power plant to have a lifetime of 15 years. Investment expenditures in each year is $9500, while operations and maintenance expenditures are $12,500. Fuel expenditures in each year are $50,000, and the plant is expected to generate 3500 kwh of electricity in each year. If the company’s discount rate is 5% and the price at which they expect to sell the electricity is $30,000 over that period, is the power plant a…A project has been proposed that will involve making an expenditure of $300,000 today to control phosphorous runoff in agricultural lands of the Fox-Wolf Watershed. Assume this effort would not pay off until 25 years from now, at which time it would reduce $1.5 million in environmental damages by eliminating a "dead spot" in the Bay of Green Bay. Choose the discount rate(s) below that would result in a favorable decision on this project. O 1% O 1% and 3% O 1%, 3%, and 5% O 1%, 3%, 5%, and 7% O 1%, 3%, 5%, 7%, and 9%The Newfoundland government is considering three new flood control projects for the Badger area. Projects A and B consist of permanent dikes. Project C is a small dam. The dam will have recreation and irrigation benefits as well as the flood control benefits. Facts about the three projects are shown in the following table. Each project has a life of 25 years. The MARR is 10%. Project A Project B Project C First Cost (millions of $) 206 236 402 Annual Benefits (millions of $) 26.8 32.1 56.8 Annual Operating and Maintenance costs (millions of $) 2.9 2.1 4.8 Part a - Use present worth to choose the best project What is the PW of Project A (in millions of dollars rounded to two decimal points eg. x.xx)? What is the PW of Project B (in millions of dollars rounded to two decimal points eg. x.xx)? What is the PW of Project C (in millions of dollars rounded to two decimal points eg. x.xx)? Which Project is the best choice (Enter either 'A',…
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- The city of Zamboanga contemplates to increase the capacity of their existing water transmission lines. Two plans are under considerations. Plan A requires the construction of a parallel pipeline, the flow being maintained by gravity. The initial costs is P2, 750, 000.00 and the life is 40 years, with an annual operating cost of P5, 000.00. Plan B requires the construction of a booster pumping stations coating P1, 050, 000.00 with the life of 40 years. The pumping equipment cost an additional amount of P250, 000.00, it has a life of 20 years and a salvage value of P25, 000. The annual operating costs is P165, 000.00. Which is the most economical plan if the interest rate is 12% and how much is the difference between the two plans. Use present worth method.A proposed bridge on the interstate highway is being considered at the cost of 4 million dollars. It is expected that the bridge will have a life of 30 years. Construction costs will be paid by government agencies. Operation and maintenance costs are estimated to be $250,000 per year. Benefits to the public are estimated to be $900,000 per year. The building of the bridge will result in an estimated cost of $250,000 per year to the general public. The project requires a return of 5%. Determine the benefit/cost (B/C) ratio.Two methods of carrying away surface runoff water from a new subdivision are being evaluated:(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 ofredigging and shaping would be required at five-year intervals forever.(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)
- 3. The town of Covington is planning to build a pedestrian/bicycle bridge across a stream at a local park. The initial cost of the bridge is estimated at $400,000 with annual maintenance of $12,000. The bridge must be resurfaced every 12 years at a cost of $100,000 and must be painted every 6 years at a cost of $25,000. If the expected life of the bridge is 60 years, what is the EAC at i-4%?You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $185,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the 3-year project life. The equipment can be sold at the end of the project for $34,000. You will also need $20,000 in net working capital for the duration of the project. The fixed costs will be $18,000 a year and the variable costs will be $168,000 per park. Your required rate of return is 15 percent and your tax rate is 34 percent. What is the minimal amount you should bid per park? A $128,600 B $154,300 C) $72,500 E $219,900 $189,100A private gym is looking at a new set of sports equipment with an installed cost of $450,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sports equipment can be scrapped for (TIP: "scrapped for" = sold for) $55,000. The sports equipment will save the gym $140,000 per year in pretax operating costs, and the equipment requires an initial investment in net working capital of $25,500. If the tax rate is 24 percent and the discount rate is 12 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV