Reference no: EM13849000
Suppose El Centro California decides to tackle the problem of nitrates in the water. Nitrates are compounds derived from synthetic fertilizers that are not assimilated by plants and leached out into the underground water and affect the human health. The way they decide to do it is to establish a new kind of water filtering technology the initial cost of such technology was 7.2 million in 2015. You are in charge of giving recommendations to the parties involved if this project is feasible.
-In 2016, incremental benefits from reducing nitrates will equal to $6.116 million while incremental cost will be $4.410
-In 2017, incremental benefits from reducing nitrates will equal to $6.211 while incremental cost will be $4.440
-In 2018, incremental benefits from reducing nitrates will equal to $7.1 million while incremental cost will be $4.5
At this time the Inflation rate is expected to be at 3.01 %
Based in this information:
1- Adjust benefits and cost to 2015 numbers (Example 2015 = time is 1)
2- Adjust for the opportunity cost of money taking into account a discount rate of 7% for costs and benefits
3- Calculate the Net present value to the society
4- Calculate the benefit to cost ratio and interpret both results Explain based on these 2 metrics if the 3 year benefit-cost analysis is feasible.
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