1. The XYZ Organization is considering allocating $10 billion to main departments this year and then an additional $5 billion dollars for each of the next two years (that is, spending is $10 billion in t=0, $5 billion in t=1, and then another $5 billion in t=2). This spending will have no effect until period 2, at which point it will save 5,000 lives. There are no other time periods, costs, or benefits to consider in this analysis.

   1. Suppose the organization assumes a value of a statistical life of 3 million and a discount rate of 0.05. What is the net present value of the spending, including costs and benefits? According to a cost-benefit analysis, should the organization allocate the money to the main departments?

   2. Suppose the organization assumes a value of a statistical life of 6 million and a discount rate of 0.05. What is the net present value of the spending, including costs and benefits? According to a cost-benefit analysis, should the organization allocate the money to the main departments?

   3. Suppose the organization assumes a value of a statistical life of 6 million and a discount rate of 0.10. What is the net present value of the spending, including costs and benefits? According to a cost-benefit analysis, should the organization allocate the money to the main departments?

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Quiz 1 The net present value of the spending is 600 million This is because the benefits 5000 lives ... View the full answer