Reference no: EM132008337

Question: NASA scientists have located a large asteroid that they are certain will collide with Earth in 275 years, doing catastrophic damage and imposing costs of $2.5 trillion ($2,500,000,000,000). They were prepared for this contingency, and have already proposed a solution: they want to build and launch a rocket that would reposition the asteroid and prevent the collision with Earth entirely. The rocket would be constructed and launched right away (the Earth's current orbit is such that we are as close to this asteroid as we will ever be prior to the projected collision, so this is our best opportunity), so all of the project's costs would be incurred immediately. The scientists are certain that the project would succeed if undertaken (NASA is feeling very confident today). Using the time-declining discount rate schedule proposed by Moore et al.,1 and assuming that all of NASA's projections are correct, how much should we be willing to pay for this intervention (i.e., what is the present value of the projects benefits, which are the same as the costs that would be avoided by the project)?