A hydroelectric dam is projected to produce annual benefits that grow in concert with the regional economic growth rate of 2%. The first benefit amount, $600,000, occurs at the end of year 5 (after the dam is constructed and the reservoir fills). If the interest rate is 8% and the benefits are assumed to continue growing through year 50 (50-year planning period), what is the present value of benefits at period 0? Also, draw the cash flow diagram.

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To calculate the present value of benefits at period 0 we need to discount the future ... View the full answer