Calculate the net benefits of leasing the land

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Question - A mining company is going to renew the lease of a land. The owner has agreed to lease the land to government for 20 years in return for a lump-sum payment of $2.8 million, which would be paid at the beginning of the twenty-year period. The mining company has estimated that the land would produce $250,000 per year in benefits to hunters, birdwatchers, and hikers. Assume that the lease price represents the social opportunity cost of the land and that the appropriate real discount rate is 5 percent. (round to whole number). Assuming that the yearly benefits, which are measured in real dollars, accrue at the BEGINNING of each of the 20 years, calculate the net benefits of leasing the land.

Reference no: EM133179965

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