2. Imagine you are deciding to store nuclear waste in certain containers. A chea

Question

2. Imagine you are deciding to store nuclear waste in certain containers. A cheap container costs $4,000, but after 100 years it will corrode and the nuclear waste will do an estimated damage of $200,000,000.

a. If the interest rate (discount rate) is 3%, what is the net present value of storing the waste in this container?

b. If the interest rate (discount rate) is 14%, what is the net present value of storing the waste in this container?

c. Discuss the impact the interest rate has on the long term benefits/damages.

Explanation / Answer

a .Net present Value = 4000 + 200,000,000/(1+0.03)^100 = 10410567.97

b. .Net present Value = 4000 + 200,000,000/(1+0.14)^100 = 4407.89

c. As the interest rate increases, the long term benefits increases as the present value value be lesser in this then with low interest rates.

If you don't understand anything then comment, I'ill revert back on the same. :)

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