Business Finance Homework Help

Before doing this assignment, do the following activities:

(1) Read the Discounting and Cost-Benefit Analysis (Chapter3-Positivist ToolBox),

(2) Follow this week’s lecture,

(3) Listen to the Podcast on Use of Cost-Benefit Analysis in State and Local Policy Making,

(3) Follow Table 3.11 to Table 3.14 in Chapter3. Positivist ToolBox.

Assignment.Week6: Cost-Benefit Analysis

City of Boondocks Example (Table 3.11 – Table 3.14) at the 5% Discount Rate

Deadline: February 11th

You received your Masters in Public Administration degree from Nova South Eastern University and became a policy analyst with the City of Boondocks. To enhance the recreational experience of citizens in your city, the city council wants to choose from the following four policy alternatives:

(1) Do Nothing

(2) Repair the Swimming Pool

(3) Build New Pool in a New Site

(4) Build New Pool on an Existing Site

Using the following data (Table1-4) concerning the four policy alternatives, calculate the NPV and BCR at a 5% discount rate and recommend the best policy alternative.

Note: Y0-Y5 stands for Year0 to Year5

(1) Alternative – Do Nothing

	Y0	Y1	Y2	Y3	Y4	Y5
Costs	0	$ 250,000	$ 250,000	$ 250,000	$ 250,000	$ 250,000
Benefits	0	$ 1,000,000	0	0	0	0
Discount Rate		5%	5%	5%	5%	5%
Discount Factor		.9524	.9070	.8638	.8227	.7835

(2) Alternative – Repair the Swimming Pool

	Y0	Y1	Y2	Y3	Y4	Y5
Costs	0	$ 1057,000	$ 32,000	$ 32,000	$ 32,000	$ 32,000
Benefits	0	$ 165,000	$ 165,000	$ 165,000	$ 165,000	$ 165,000
Discount Rate		5%	5%	5%	5%	5%
Discount Factor		.9524	.9070	.8638	.8227	.7835

(3) Alternative – Build New Pool at a New Site

	Y0	Y1	Y2	Y3	Y4	Y5
Costs	0	$ 1,080,000	$ 80,000	$ 80,000	$ 80,000	$ 80,000
Benefits	0	$ 365,000	$ 365,000	$ 365,000	$ 365,000	$ 365,000
Discount Rate		5%	5%	5%	5%	5%
Discount Factor		.9524	.9070	.8638	.8227	.7835

(4) Alternative – Build New Pool at an Existing Site

	Y0	Y1	Y2	Y3	Y4	Y5
Costs	0	$ 1000,000	$ 55,000	$ 55,000	$ 55,000	$ 55,000
Benefits	0	$ 165,000	$ 165,000	$ 165,000	$ 165,000	$ 165,000
Discount Rate		5%	5%	5%	5%	5%
Discount Factor		.9524	.9070	.8638	.8227	.7835