Economic Evaluation Assignment 2

Name:
Student #:
49003 ECONOMIC EVALUATION
Assignment # 2 (Autumn 2019)
Due: 3 June 2019
ANSWER-SHEET
Please summarize your results in the table below: (9 Marks)
Financial Economic
Proposal A Proposal B Proposal A Proposal B
NPV = 0 (at real
discount rate)
= 0 (at real
discount rate)
N.A. N.A.
IRR 10% (same as
real discount
rate)
10% (same as
real discount
rate)
N.A. N.A.
PB 10 years 10 years N.A. N.A.
B/C
PV of return /
initial
investment
=0.9973
=1
PV of return /
initial
investment
=0.9978
=1
N.A. N.A.
Life Cycle Cost $ 100 bn. $ 160 bn. $ 84 bn. $ 144 bn.
Equivalent Annual Cost $ 5 bn. $ 6 bn. $ 1 bn. $ 2 bn.
Consumer Surplus N.A. N.A. $ 8 bn. $ 8 bn.
Producer Surplus N.A. N.A. $ 10 bn. $ 15 bn.
Total Surplus N.A. N.A. $ 18 bn. $ 23 bn.
Deadweight Loss N.A. N.A. N.A. N.A.
Note: NPV; Equivalent Annual Cost; Life Cycle Cost; and Surpluses (Consumer, Producer, and
Total)and Deadweight Loss - must be rounded off to the nearest billion dollars (i.e., no decimals),
and IRR and PB - to the nearest ‘whole’ percents and years (i.e., no decimals), and B/C - to one
decimal point only.
1. Which proposal will you recommend from investor’s perspective? (2 Marks)
A B Either Neither
49003-Assign2A2019-answer template Page 1 of 3