The investment cost of a flood prevention project is EUR 400 million. The annual net benefit will
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The investment cost of a flood prevention project is EUR 400 million. The annual net benefit will depend on the amount of rainfall: EUR 10 million in a “normal” year, EUR 25 million in a “flood” year. Meteorological historical data indicate that over the last 50 years there have been 40 “normal” years and 10 “flood” years. Using this information as a basis of prediction, what are the net benefits of the project if the real discount rate is 3 per cent?
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