Costs |
$900 million/year first three years |
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Construction costs: |
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Operating costs: |
$80 million/year |
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Agricultural product lost from flooded lands: |
$65 million/year |
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Forest products lost from flooded lands: |
$40 million/year |
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Benefits |
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Revenues from Power Generation |
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Hydropower generated: |
4 billion Kilowatt hours/year |
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Price of electricity: |
$0.125/Kilowatt hour |
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Revenues from Irrigation Services |
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Irrigation water available from the dam: |
200K Acre-Feet |
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Price of water: |
$700/Acre-Foot |
Table A | Table B | |||||
Interest Rate: | 0.07 | |||||
(1) | (2) | (3) | (1) | (2) | (3) | |
Discount Based on End of the Year | Annual Net Benefits ($) | Present Value Based (7% Interest Rate) | Discount Based on Beginning the Year | Annual Net Benefits ($) | Present Value Based (7% Interest Rate) | |
1 | 100.00 | $93.46 | 0 | 100.00 | $100.00 | |
2 | 100.00 | $87.34 | 1 | 100.00 | $93.46 | |
3 | 100.00 | $81.63 | 2 | 100.00 | $87.34 | |
4 | 100.00 | $76.29 | 3 | 100.00 | $81.63 | |
5 | 100.00 | $71.30 | 4 | 100.00 | $76.29 | |
6 | 100.00 | $66.63 | 5 | 100.00 | $71.30 | |
7 | 100.00 | $62.27 | 6 | 100.00 | $66.63 | |
8 | 100.00 | $58.20 | 7 | 100.00 | $62.27 | |
9 | 100.00 | $54.39 | 8 | 100.00 | $58.20 | |
10 | 100.00 | $50.83 | 9 | 100.00 | $54.39 | |
11 | 100.00 | $47.51 | 10 | 100.00 | $50.83 | |
12 | 100.00 | $44.40 | 11 | 100.00 | $47.51 | |
13 | 100.00 | $41.50 | 12 | 100.00 | $44.40 | |
14 | 100.00 | $38.78 | 13 | 100.00 | $41.50 | |
15 | 100.00 | $36.24 | 14 | 100.00 | $38.78 | |
16 | 100.00 | $33.87 | 15 | 100.00 | $36.24 | |
17 | 100.00 | $31.66 | 16 | 100.00 | $33.87 | |
18 | 100.00 | $29.59 | 17 | 100.00 | $31.66 | |
19 | 100.00 | $27.65 | 18 | 100.00 | $29.59 | |
20 | 100.00 | $25.84 | 19 | 100.00 | $27.65 | |
$1,059.40 | $1,133.56 | |||||
Notes: | (1) Discounting based on 7% interest rate with discount rate given by (1/(1+0.07)^year). | |||||
(2) Both tables show present value calculations - yearly and total - for 20 $100 net benefit payments. Specifically, column (2) in each table shows how much money is arriving in each of the 20 years ($100) and column (3) shows what each of those $100 payments is worth in present value dollars using a 7% interest rate to discount the money. | ||||||
(3) Table A discounts based on the money arriving at the end of each year and Table B discounts based on the money arriving at the beginning of each year. |
Assuming the project will be under construction for first 3 years and then run for 17 years.
So, the net benefit indicates that the project should be executed.
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