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Natali5045456 [20]
2 years ago
14

The environmental protection agency of a county would like to preserve a piece of land as a wilderness area. The current owner h

as offered to lease the land to the county for 20 years in return for a lump-sum payment of $1.1 million, which would be paid at the beginning of the 20-year period. The agency has estimated that the land would generate $110,000 per year in benefits to hunters, bird watchers, and hikers. Assume that the lease price represents the social opportunity cost of the land and that the appropriate real discount rate is 4 percent.
a. Assuming that the yearly benefits, which are measured in real dollars, accrue at the end of each of the 20 years, calculate the net benefits of leasing the land. Should the environmental protection agency pay for this piece of land?
b. Some analysts in the agency argue that the annual real benefits are likely to grow at a rate of 2 percent per year due to increasing population and county income. Recalculate the net benefits assuming that they are correct. Should the environmental protection agency pay for this piece of land?
Business
1 answer:
makvit [3.9K]2 years ago
5 0

Answer:

a. Assuming that the yearly benefits, which are measured in real dollars, accrue at the end of each of the 20 years, calculate the net benefits of leasing the land. Should the environmental protection agency pay for this piece of land?

the net benefits of leasing the land = the present value of the benefits generated

PV = annual benefit x pv annuity factor

  • annual benefit = $110,000
  • pv annuity factor 20 years, 4% = 13.590

PV = $110,000 x 13.59 = $1,494,900

Since the present value of the benefits is higher than the lease price, then this transaction should be carried out.

b. Some analysts in the agency argue that the annual real benefits are likely to grow at a rate of 2 percent per year due to increasing population and county income. Recalculate the net benefits assuming that they are correct. Should the environmental protection agency pay for this piece of land?

this is a growing annuity, therefore we have to use the following formula:

PV = [p / (r - g)] x {1 - [(1 + g)/(1 + r)]ⁿ}

  • p = $110,000
  • r = 4%
  • g = 2%
  • n = 20

PV = [$110,000 / (4% - 2%)] x {1 - [(1 + 2%)/(1 + 4%)]²⁰} = $5,500,000 x 0.321833005 = $1,770,081.53

Since the present value of the net benefits are even higher now, then the environmental agency should definitely pay.

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The answer is human resource.

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I hope this helps!

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A variable cost a. is synonymous with labor costs b. changes in the same direction and in direct proportion to changes in operat
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b. changes in the same direction and in direct proportion to changes in operation activity.

Explanation:

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6 0
3 years ago
There are two machines for sale that you are considering purchasing for your sawmill to produce hardwood flooring. You want to f
vladimir2022 [97]

Answer:

1. The Cpk of machine 1 would be 0.952

2. The Cpk of machine 2 would be 1.111

3.  I would buy machine 2, because the Cpk value is more than 1.

4. The Cpk would be 2.222

Explanation:

1. In order to calculate the Cpk of machine 1 we would have to use to following formula:

Process capability index: Cpk= Min [(mean-L spec)/3sd; (U spec-mean)/3sd]

According to given data:

In machine 1, mean= 48mm

L spec= 46

U spec= 50

Standard deviation sd= 0.7

Therefore, Cpk of machine 1= [0.952;0.952]= 0.952

1. In order to calculate the Cpk of machine 2 we would have to use to following formula:

Process capability index: Cpk= Min [(mean-L spec)/3sd; (U spec-mean)/3sd]

According to given data:

In machine 2, mean= 47

L spec= 46

U spec= 50

Standard deviation sd= 0.3

Therefore, Cpk of machine 2= [1.111;3.333]= 1.111

3. If my goal is to be capable, I would buy machine 2, because the Cpk value is more than 1.

4. If you combine the best of both machines to calculate the cpk we to make the following calculation:

Combination specification, mean= 48 and L spec= 46 and U spec= 50, Standard deviation sd= 0.3

Therefore, Cpk= [2.222;2.222]= 2.222

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3 years ago
When profit-maximizing firms in competitive markets are earning profits, market demand must exceed market supply at the market e
ella [17]
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3 years ago
Shepherd Corporation had earnings and profits of $500,000 before distributions. Due to economic conditions, Shepherd, in partial
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Answer:

amount recognized gain = $7500

Explanation:

given data

profits = $500,000

basis = $67,500

fair market value = $75,000

interest = 95%

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to find out

amount of Shepherd Corporation’s recognized gain or loss

solution

we know that here effect of non liquidating distributions on corporation is gain are recognised on property that is express as

amount recognized  = fair market value  - Basis  .................1

put here value we get

amount recognized = $75,000 - $67,500

amount recognized gain = $7500

8 0
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