Question

The government of XY Village has been concerned by the toxic air pollution risk in the village and initiated a new policy campaign called "Clean Air Better Lives". Two green energy companies in the village, Green Ltd and Clean Air Ltd, proposed projects that can potentially deliver the objective of the campaign. The projects' benefit and cost streams are computed as follows. The discount rate for the projects is 9 %. 5 and 1 2 4 year after Green Benefits 3000 7000 12000 17000 22000 150 6000 20000 15000 5000 Costs 5000 0 Benefits 0 10000 20000 10000 1010 4000 Clean Costs 6000 20000 15000 5000 5000 0 air This means that the payment stream of year 5 will go on forever What are the net present values of each projects? (5 marks) What are the future worth of each projects? (5 marks) What are the Annual worth of each projects? (5 marks) Which project should be selected? ( 5 marks) iv

Answer 1

Project Green و مادر در کره Altensthyr Net Benefits Sasts Sools Inflows Inflows, Dr@gh Present value 3000 6000 13000) 90 1 (3000) 7000 20000 1200) (13000) 1842 194 (11921) 12.000 45000 17000 (3000) S000 772.842 (2526) 22000 12000 17/08 Sooo 1772 9264 150 12000 si 1708 12036 150 SAL 651 97.65 3951 "150 1666.67 X 1651)= 1885 09 Total NPV = (108 +3951) = 5036 clean air DF@ay, PV Net Inflac . Benefits for Cost (5000) 6000 (6000) (14672) 1917 (1 gavo) 20000 4000 1 15 000 1842 5000) 10000 (4210) 20000 5000 15000 722 11 580 5000 10000 708 S000 3540 Lolo 651 5 1010 0 65tis (9105) I After sthyr 1018 = (11222X1654) - 7306 109 Total NPV = 5-9105+7808] = - 1999 o