Finance
The present value of the investment cost of a project that is completed at the beginning of year 0 is 1000. If the costs stay at the same level (in real present value terms no matter when the project is completed) while the real net benefits grow over time according to the following schedule:
Year | 1 | 2 | 3 | 4 | 5 |
Net benefits | 50 | 70 | 90 | 120 | 150 |
The opportunity cost of alternative investments r is 10%.
What year would you recommend starting the project?
If the present value of the investment cost increases by 20 each year beginning in year 1, what year would you recommend completing the investment phase of the project?
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