Assignment: Marginal Analysis Problems

Assignment: Marginal Analysis Problems

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Assignment: Marginal Analysis Problems

A government agency must decide whether to buy a computer which costs $80,000. The machine is likely to be obsolete at the end of three years, with no salvage value. During those years it will return annual net benefits (i.e., benefits over and above operating expenses) of $40,000 at the end of the first year; $40,000 at the end of the second year; and $20,000 at the end of the third year.

What is the present value of the net benefits of the computer in #1 if the discount rate is 10%?

2. What is the present value of the net benefits of the computer in #1 if the discount rate is 15%?

3. The state of New York is building a dam on a short river. Only one dam can be built, and two mutually exclusive sites for it are being considered. After monetizing all the benefits, the time streams for the two sites are as follows:

 

Now Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Site costs 3.million 0.9 million 0.8 million 0.4 million 0.4 million 0.2 million
A benefits —- 0.2 million 1.8 million 1.9 million 3.6 million 4.2 million
Site costs 4 million 1 million 0.8 million 0.7 million 0.4 million 0.4 million
B benefits —- 1 million 2.8 million 3.7 million 3.9 million 6.4 million

At a discount rate of 11%, what is the present value of the net benefits of site A?

What is the present value of the net benefits of site B?

ESSAY GUIDELINES -:

Write a 1000-1500-word essay addressing each of the following points. Be sure to completely answer all the questions for each bullet point. There should be two main sections, one for each bullet below. Separate each section in your paper with a clear heading that allows your professor to know which bullet you are addressing in that section of your paper.

Support your ideas with at least three (3) sources using citations in your essay. Make sure to cite using the APA writing style for the essay. The cover page and reference page in correct APA do not count towards the minimum word amount. Review the rubric criteria for this assignment.

Length: 1000-1500 words; answers must thoroughly address the prompts in a clear, concise manner.

Evaluation Criteria for Paper

(10%) Resources used as rationale for approaches and as sources of content

_____ 5. (20%) write paper in a scholarly manner
(4%) Format includes title page, body of paper, & reference page, with pages numbered

_____ 5. (20%) Write the Paper in a scholarly manner
(4%) Format includes title page, body of paper, & reference page, with pages numbered