You have been asked to consult on the Project, which is an effort to restore a river as it flows through the city. The project will cost $25,000,000 in the first year and an additional $450,000 each year for another 9 years. The increased amenities, recreational opportunities, and local business activity are expected to yield $4,500,000 in benefits each year, beginning in year one of the project.

A. Fill in the blanks in the table below, assuming a discount rate of 7%. 

Year	Benefits	Costs	Net Benefits	Discounted Net Benefits
0
1
2
3
4
5
6
7
8
9
10
11

 

B.  What is the net present value of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the project go ahead or not?

C. Find the breakeven discount rate such that the net present value of this development opportunity is zero (i.e. find the internal rate of return)

Answer rating: 100% (QA)

A To fill in the table we need to calculate the costs benefits net benefits and discounted net benefits for each year The discount rate is 7 Year Bene... View the full answer