Question: Suppose an updated climate change mitigation plan is being debated at the 2023 Climate meetings being held in the UAE. Suppose that plan shows this
Suppose an updated climate change mitigation plan is being debated at the 2023 Climate meetings being held in the UAE. Suppose that plan shows this stream of benefits and costs, measured in trillions of US dollars per year Please answer the following questions about the plan: 1. Calculate the discounted net present value (DNPV) of this program using a discount rate of 0.05 . 2. Graph its DNPV for varying discount rates between 0.00 and 0.10 , varying for 2 percent increments, i.e. 0.00,0.02,0.04,0.06,0.08, and 0.10 . What pattern do you see, and what does that pattern suggest about the influence of discount rates on the DNPV for projects that incur early costs and receive later benefits. 3. Calculate the benefit-cost ratio of this project (DNPV of benefits divided by DNPV of costs) using a discount rate of 0.10 . 4. Calculate the internal rate of return for this project, that is, the discount rate, which, if used produces a zero DNPV. 5. Which would you prefer to use, the social opportunity cost of capital or the rate of time preference to evaluate a climate mitigation plan for which most costs were incurred in the present and most benefits accrued for future generations? Explain
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
