Reference no: EM133389359

Assignment:

500 megawatt coal based electricity plant pours into the atmosphere 10,000 tons of sulfur dioxide, which causes acid rain, 10,200 tons of nitrogen oxide that leads to smog, 700 tons of carbon monoxide per year. Annual external health costs include $59/ton for nitrogen oxide $29/ton for fine particulates $28/ton for sulfur dioxide $0.39/ton for carbon monoxide It costs $2 million to build and $350,000 each year to operate it. The plant creates an aggregate economic benefit of $900,000 each year starting form the second year as the first year is used up building the facility.

A. Apply cost benefit analyses if the investment makes economic sense with 15 year useful life of the electricity plant and 8% discount rate without considering the environmental cost.

B. Consider the environmental costs and run cost benefit analyses again and discuss how it affects the economic sensibility of the investment.

C. Will the investment make economic sense with 15 year useful life of the electricity plant and 3% discount rate when considering the environmental costs.