In the table below presented the data on the investment in the renewable energysource (wind farm). This wind farm will be located in the scenic area (has a visualimpact on the communities close by).Costs are estimated as follows:Construction cost = $750,000Maintenance cost = $5,000 per year for the next 15 yearsCost of dismantling at the end of 15-year lifespan = $35,000Compensation for view loss = $25 annually per household for 2,000 householdBenefits as follows:Market value of electricity = $150,000 per yearDirections:1. Construct the table for CBA analysis2. Calculate present value (PV) of costs and benefits using the CBA table3. Conduct a CBA test (as difference between present value of benefits andcosts)4. Make a decision on investment (Yes/No)

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Directions: 1. Construct the table for CBA analysis 2. Calculate present value (PV) of costs and benefits using the CBA table 3. Conduct a CBA test (as difference between present value of benefits and costs) 4. Make a decision on investment (Yes/No)

Directions: 1. Construct the table for CBA analysis 2. Calculate present value (PV) of costs and benefits using the CBA table 3. Conduct a CBA test (as difference between present value of benefits and costs) 4. Make a decision on investment (Yes/No)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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Question

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In the table below presented the data on the investment in the renewable energy
source (wind farm). This wind farm will be located in the scenic area (has a visual
impact on the communities close by).
Costs are estimated as follows:
Construction cost = $750,000
Maintenance cost = $5,000 per year for the next 15 years
Cost of dismantling at the end of 15-year lifespan = $35,000
Compensation for view loss = $25 annually per household for 2,000 household
Benefits as follows:
Market value of electricity = $150,000 per year
Directions:
1. Construct the table for CBA analysis
2. Calculate present value (PV) of costs and benefits using the CBA table
3. Conduct a CBA test (as difference between present value of benefits and
costs)
4. Make a decision on investment (Yes/No)

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