The World Bank is considering whether to lend a country money to build a new water supply project that will allow the country to increase its acreage of irrigated crops. The new irrigated crop acreage is expected to generate increases in exports amounting to $1,000 million annually in addition to increases in domestic food sales of $200 million annually. The water supply project will cost $5,000 million up front and $10 million a year for operation and maintenance. The World Bank will charge the country an interest rate of 5%, compounded annually and payable over 50 years. If the country is able to tax exports at a rate of 25% and domestic sales at a rate of 5%, will the project generate sufficient income to pay back the loan and cover the project’s operating costs?

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Particulars Amount in Millions Cost of the Loan A Int... View the full answer