A workshop designed to retrain workers 55 years of age and older who have lost t

Question

A workshop designed to retrain workers 55 years of age and older who have lost their jobs is proposed. Suppose the workshop will increase the income of each participant by $1,000 per year for a period of 10 years.

a) Calculate the present value of the increased income per participant with each of the following discount rates: 0%, 1%, 3%, 5%, and 10%

b)if the cost per participant is $8,000 and all those costs are incurred in the first year, at what discount rates will the benefit-cost ratio of the project exceed 1?

Explanation / Answer

Discount Rate

PVBenefits=$1K+$1K/(1+r)1+$1K/(1+r)2+

Discount Rate

PVBenefits=$1K+$1K/(1+r)1+$1K/(1+r)2+

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