ECP 3302 Activity 3.1 – Mini Problem Set Name: 1. You are trying to decide on th
ID: 1216205 • Letter: E
Question
ECP 3302
Activity 3.1 – Mini Problem Set
Name:
1. You are trying to decide on the best way to clean up a pond that can be used for recreation and are given two schedules of costs and benefits over the next ten years that area as follows:
PLAN A
PLAN B
YEAR
Costs
Benefits
Costs
Benefits
0
400
25
10
20
1
20
75
10
20
2
20
75
10
20
3
20
75
10
20
4
20
75
10
20
5
20
75
10
20
6
20
75
10
20
7
20
75
10
20
8
20
75
10
20
9
20
75
10
20
10
20
75
200
100
a. If you are indifferent between current consumption and future consumption, which plan would you choose? Show the calculations you used to come up with your answer.
b. If the discount rate is 3%, which plan would you choose? what if the discount rate is 10%? Show the calculations you used to come up with your answer. (attach extra pages, if necessary)
PLAN A
PLAN B
YEAR
Costs
Benefits
Costs
Benefits
0
400
25
10
20
1
20
75
10
20
2
20
75
10
20
3
20
75
10
20
4
20
75
10
20
5
20
75
10
20
6
20
75
10
20
7
20
75
10
20
8
20
75
10
20
9
20
75
10
20
10
20
75
200
100
Explanation / Answer
a. Plan A to be selected as it has higher benefits value
b. With 3% discount rate, Plan A is selected, refer below table
with 10% discount rate Plan B will be selected, refer below table
PLAN A PLAN B YEAR Costs Benefits Costs Benefits 0 400 25 10 20 1 20 75 10 20 2 20 75 10 20 3 20 75 10 20 4 20 75 10 20 5 20 75 10 20 6 20 75 10 20 7 20 75 10 20 8 20 75 10 20 9 20 75 10 20 10 20 75 200 100 Total 600 775 300 300Related Questions
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