Environmental economy

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Consider the following data from a hypothetical dam construction project.Does the project make economic sense if the interest rate is 5% per year?Explain your answer using numerical calculations.(Please show your calculations clearly, including the time line diagram, otherwise there can be no partial credit.)

Potential Costs

  • Construction cost: $20,000 per year for years 0 – 7
  • Operating and maintenance (O&M) costs: $10,000 per year for years 8 – 50
  • Opportunity cost of land: $15,000 annually for years 8 through eternity
  • Loss of service from free flowing river: $7,000 annually for year 8 through eternity

Potential Benefits

  • Electricity generation: $60,000 per year for years 8 – 50
  • Flood control: $8,000 per year for years 8 through 50
  • Reservoir recreation: $7,500 per year for years 8 through 50

 

Last Updated on November 12, 2019 by EssayPro