Andersen et al. (2014) conducted an analysis of the costs of implementing a risk assessment system at the point of release for prisoners in Illinois who are being put on Mandatory Supervised Release.1 They estimated that the program would cost $13,359,653 per year in staff salaries and benefits, training costs, and the costs of acquiring the risk assessment tool that would be used.
(a)Calculate the cost in present value terms over the next three years (year 0, year 1, and year 2) assuming an interest rate of 3%. Assume that this year's cost will be paid immediately.
(b)What does the present value of the cost represent conceptually? Be specific.

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a To calculate the present value of the cost over the next three years we will discount each years c... View the full answer