What is the present value

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Reference no: EM133125102

Suppose John is deciding how to dispose of some hazardous waste. He can contain it safely at a cost of $200 or bury it in the local landfill. If he chooses the second option, in ten years' time the stuff will have seeped out enough to permanently ruin the vineyard of Maria, who lives next-door to the landfill. The vineyard has a value to her in ten years of $500 (i.e., she'd sell it then for $500).

a) What is the present value of $400 in ten years' time at a discount rate of 8%

b) Is it socially efficient to bury the waste in the landfill?

Reference no: EM133125102

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