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ASSIGNMENT #5 1. Suppose an investment of $250,000 today will avoid $1,500,000 of environmental damage 75 years from now. (2

Hey :), Can someone please help me with this question?

(if possible, show work and process)

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Answer #1

a. Present value of future benefit = 1500000 / (1+0.02)^75 = 1500000 / 1.02^75

= 339686.57

As Present value of the future benefit is more than the present cost, so investment will be considered feasible

b.

Present value of future benefit = 1500000 / (1+0.025)^75 = 1500000 / 1.025^75

= 235397.23

As Present value of the future benefit is less than the present cost, so investment will not be considered feasible

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