Q5. A risk analysis has been performed, and the risk has been calculated at 0.05 fatalities/yr. A risk reduction measure has been proposed and if this is implemented, the risk will be reduced to 0.04 fatalities/yr (20% reduction).The cost of this risk reduction measure is 1 million in investment and 0.2 million yr–1 in operating costs. The risk reduction measure will have an effect for 20 years. For cost-benefit purposes, value of a statistical life (VSL) is set to 25 million. Perform a cost-benefit analysis and decide if the risk reduction measure has a positive cost-benefit or not.

Q5. A risk analysis has been performed, and the risk has been calculated at 0.05 fatalities/yr. A risk reduction measure has been proposed and if this is implemented, the risk will be reduced to 0.04 fatalities/yr (20% reduction).The cost of this risk reduction measure is 1 million in investment and 0.2 million yr–1 in operating costs. The risk reduction measure will have an effect for 20 years. For cost-benefit purposes, value of a statistical life (VSL) is set to 25 million. Perform a cost-benefit analysis and decide if the risk reduction measure has a positive cost-benefit or not.

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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