Suppose you’re hired by the Asian Development Bank (ADB) to determine whether a dam should be built to improve irrigation infrastructure in two regions of Afghanistan. The country is extremely arid, with ≤ 5 cm of rainfall annually in certain regions. Eighty percent of agriculture in Afghanistan depends on irrigation, and eighty percent of irrigated agriculture relies on surface water. Thus, dams and irrigation canal systems are critical inputs to agricultural production in Afghanistan.

Many of these systems have fallen into disrepair. In 2009, the ADB pledged millions of dollars to upgrade irrigation infrastructure in Afghanistan, and you have been hired to determine where to put a dam.

1.The ADB identifies two potential locations for dams. The first, located in the Balkhab Province outside Mazar-i-Sharif, could supply water to 4,000 jeribs (2,000 ha) of wheat fields. Each jerib requires 2,500 m3 of irrigation water per year. The increased wheat yield per cubic meter of water earns farmers $0.70.
The annual benefits from the Balkhab dam are $

2. Assume the life expectancy for the dam is 30 years, and the benefits begin in year 1. Rounded to the nearest integer, the present value of benefits from the dam given a 2.5 percent discount rate is $

3). Suppose the dam costs $100 million to construct in year 0. Thereafter, the dam costs $500,000 per year to operate and maintain. Rounded to the nearest integer, the present value of costs from the dam given a 2.5 percent discount rate are $

Answer rating: 100% (QA)

Solution to ... View the full answer