Your city is expanding a public health program and must rent a location. You have a choice of two different locations with different leases offered. The first lease would last forever, cost $9 million now and then generates benefits, starting next year, of $1M forever. Another location has a lease that would last one year, cost $2M now and then generates benefits for the next year only, of $4M. The discount rate is 10%, and there is no inflation.

a) Calculate the NPV for each. Which do you recommend?

b) Assume the benefits of public health grow by 2% per year, beginning in year. Find NPV. Which do you recommend?

Answer rating: 100% (QA)

a To calculate the Net Present Value NPV of each location we need to discount the future cash flows ... View the full answer