What net present values generated by private benefit-cost

Reference no: EM132178152

Question - A domestic firm is considering a project which has, at market prices and before tax, a present value of benefits of $2000 and a present value of costs of $1000. If the project goes ahead, business income tax with a present value of $200 will be paid to the host country, domestic labour which would otherwise be unemployed will be paid wages with a present value of $250 for working on the project (the wage bill is included in the $1000 input costs referred to above), and pollution caused by the project will reduce the value of output elsewhere in the host country's economy by $240. It is estimated that the opportunity cost of otherwise, unemployed labour is a fifth of the market wage.

(a) Assuming that the owners of the firm are also part of the Referent Group, what are the net present values generated by:

i) the project/market benefit-cost analysis?

ii) the private benefit-cost analysis?

iii) the efficiency benefit-cost analysis?

iv) the aggregate referent group benefit-cost analysis?

Reference no: EM132178152

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