aiO Toryour house) that has a lifetime of 5 years. It will cost you $130 to install and will reapbenefits in terms of energy saved of $10 in year 1, $20 in year 2, $30 in year 3, $40 inyear 4, and $50 in year 5.Calculate your discount factors for each of the next 5 years.dа.What is the net present value of the energy savings?Is the insulation a good investment for you?Would the insulation be a good investment if your discount rate were a constant5% over the 5 years?b.с.d.bai4.An investment of $100 today will avoid $1,000,000 of environmental damage in 100years.a.At a discount rate of 10%, is this investment a good idea?b.At a discount rate of 1%, is this investment a good idea?At a discount rate of 2%, what is the maximum we would be willing to pay toavoid the million dollars of environmental damage in 100 years?c.0s5.Consider the twin communities of Tuckerville and Matildastan. These are seasideresorts that neighbor each other and attract many tourists. Matildastan wants toraise some money to clean up the streams in town; their approach to this is to levya "bed tax"-a per night tax on every visitor to a hotel. There are 3,500 hotel roomsin Matildastan and 1,500 hotel rooms in Tuckerville. The rooms are identical andtourists do not really mind which town they stay in. There are no other nearbytowns.The variable cost of providing a hotel room (electricity, maid service, other laborclerks, etc.) and $10 for nonwage

Question
Asked Sep 30, 2019

i  need help with number 4 

aiO Tor
your house) that has a lifetime of 5 years. It will cost you $130 to install and will reap
benefits in terms of energy saved of $10 in year 1, $20 in year 2, $30 in year 3, $40 in
year 4, and $50 in year 5.
Calculate your discount factors for each of the next 5 years.
d
а.
What is the net present value of the energy savings?
Is the insulation a good investment for you?
Would the insulation be a good investment if your discount rate were a constant
5% over the 5 years?
b.
с.
d.
b
ai
4.
An investment of $100 today will avoid $1,000,000 of environmental damage in 100
years.
a.
At a discount rate of 10%, is this investment a good idea?
b.
At a discount rate of 1%, is this investment a good idea?
At a discount rate of 2%, what is the maximum we would be willing to pay to
avoid the million dollars of environmental damage in 100 years?
c.
0s
5.
Consider the twin communities of Tuckerville and Matildastan. These are seaside
resorts that neighbor each other and attract many tourists. Matildastan wants to
raise some money to clean up the streams in town; their approach to this is to levy
a "bed tax"-a per night tax on every visitor to a hotel. There are 3,500 hotel rooms
in Matildastan and 1,500 hotel rooms in Tuckerville. The rooms are identical and
tourists do not really mind which town they stay in. There are no other nearby
towns.
The variable cost of providing a hotel room (electricity, maid service, other labor
clerks, etc.) and $10 for nonwage
help_outline

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aiO Tor your house) that has a lifetime of 5 years. It will cost you $130 to install and will reap benefits in terms of energy saved of $10 in year 1, $20 in year 2, $30 in year 3, $40 in year 4, and $50 in year 5. Calculate your discount factors for each of the next 5 years. d а. What is the net present value of the energy savings? Is the insulation a good investment for you? Would the insulation be a good investment if your discount rate were a constant 5% over the 5 years? b. с. d. b ai 4. An investment of $100 today will avoid $1,000,000 of environmental damage in 100 years. a. At a discount rate of 10%, is this investment a good idea? b. At a discount rate of 1%, is this investment a good idea? At a discount rate of 2%, what is the maximum we would be willing to pay to avoid the million dollars of environmental damage in 100 years? c. 0s 5. Consider the twin communities of Tuckerville and Matildastan. These are seaside resorts that neighbor each other and attract many tourists. Matildastan wants to raise some money to clean up the streams in town; their approach to this is to levy a "bed tax"-a per night tax on every visitor to a hotel. There are 3,500 hotel rooms in Matildastan and 1,500 hotel rooms in Tuckerville. The rooms are identical and tourists do not really mind which town they stay in. There are no other nearby towns. The variable cost of providing a hotel room (electricity, maid service, other labor clerks, etc.) and $10 for nonwage

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Expert Answer

Step 1

Net Present Value: The net value which is calculated after deducting present value of cash outflows from present value of cash inflows is termed as net present value.

Step 2

The formula for calculation of Net present value is as follows:

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Step 3

a) At a discount rate of 10%, the net pres...

NPV-Present value of cash inflow- Present value of cash outflows
NPV=1,000,000
--100
100
(1.10)
NPV-$72.57-100
NPV-$27.43
As the present value of benefit is less than the present value of cost that means that NPV
is negative and investment at the discount rate of 10% is not a good idea.
help_outline

Image Transcriptionclose

NPV-Present value of cash inflow- Present value of cash outflows NPV=1,000,000 --100 100 (1.10) NPV-$72.57-100 NPV-$27.43 As the present value of benefit is less than the present value of cost that means that NPV is negative and investment at the discount rate of 10% is not a good idea.

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