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
Related questions
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)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff0a38142-6806-45a7-9176-a19467f17540%2F9e6db508-09a7-444f-98a5-5d3d83a8c44b%2F78ng16_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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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