The town council\'s finance committee has evaluated data and determined that the

Question

The town council's finance committee has evaluated data and determined that the present discounted value of the benefits from a proposed dog park comes to $3.25 million. The total construction cost of the dog park is $2.9 million. This implies that the dog park should be built. Do you agree with this conclusion? Explain your answer O A. It should be built at a cost of S2.9 million because its present value is greater than that amount. O B. It should not be built at a cost of $2.9 million because its present value is greater than that amount O C. It should be built at a cost of S2.9 million because the city will receive benefits in many future periods. D. O E. It should not be built at a cost of $2.9 million because its present value will be substantially less once discounted. It should be buit at a cost of S2.9 million because its present value is less than that amount. If the interest rate decreases, the likelihood that the dog park should be built will O A. O B. ° C. O D. E. increase, because future periods will be discounted by more. increase, because future benefits will be discounted by less not change, because the present value of future benefits is not dependent on the interest rate decrease, because the dog park will be less valuable since investments are worth less. decrease, because the present value of future benefits will increase.

Explanation / Answer

Option A) as the present values outweigh the cost of construction.

option B) when interest rate decreases, the likelihood of the dog park increases as the cost of borrowing falls, and the

future benefits will be discounted by less

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