Find the Present Value of the Project based on its Cost-Benefit Analysis and Soc

Question

Find the Present Value of the Project based on its Cost-Benefit Analysis and Social Discount Rate of 4.67%. (Operational Costs and all Benefits Categories are a constant value for 20 years, starting at year 7)

YEAR Costs (in millions) 1 2 3 4 5 6 7 8 9 ... 26 Land Permits 14 - - - - - - - - 14 Construction 196.672 196.672 196.672 196.672 196.672 196.672 - - - 1180.03 Local Business Loss of Income 1.39022 1.39022 1.39022 1.39022 1.39022 1.39022 - - - 8341.32 Operational - - - - - - 10.92 10.92 10.92 218.4      Total Costs 212.062 198.062 198.062 198.062 198.062 198.062 10.92 10.92 10.92 9753.75 Benefits (in millions) 1 2 3 4 5 6 7 8 9 ... 26 Public Health Benefits - - - - - - 1.4 1.4 1.4 28 Lowered Traffic Volume - - - - - - 484.464 484.464 484.464 9689.28      Total Benefits 9717.28

Explanation / Answer

PV of cost = 14 + 198.062*(1-(1+.0467)^-6)/.0467 = 1030

PV of benefits = (484.464 - 10.92) * (1-(1+.0467)^-20)/.0467 / 1.0467^6 = 4615.95

NPV = 4615.95 - 1030

= 3585.95

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