Answered: Suppose you are a regulator considering…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...

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Suppose you are a regulator considering applying a technology standard to automobile manufacturers. This standard would require a 10 million dollar investment by the manufacturers, but each year it would reduce total carbon emissions by 10,000 tons. Using a social cost of carbon of $75, a 3% discount rate, and considering only the next twenty years, what is the NPV of applying this standard? (Assume the investment is made immediately and then benefits of carbon emissions are received at the end of year1, 2, ... and year 20. Round to the nearest whole number.)

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