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The government is considering an environmental project that has an upfront capital cost of
$250,000, a 25,000 stream of net benefits over 12 years, and a terminal value of 16,000. The net
benefits are realized at the end of each year and the terminal value is realized at the end of the
12th year. If the nominal interest rate is 5.05% and the rate of inflation is 1.4%, then the projects:
Question options:
a) net present value is $135 and the government should not proceed with it.
b) net present value is $634 and the government should proceed with it.
c) net present value is $634 and the government should not proceed with it.
d) net present value is $135 and the government should proceed with it.

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  • 1. The government is considering an environmental project that has an upfront capital cost of $250,000, a 25,000 stream of net benefits over 12 years, and a terminal value of 16,000. The net benefits are realized at the end of each year and the terminal value is realized at the end of the 12th year. If the nominal interest rate is 5.05% and the rate of inflation is 1.4%, then the projects: Question options: a) net present value is $135 and the government should not proceed with it. b) net present value is $634 and the government should proceed with it. c) net present value is $634 and the government should not proceed with it. d) net present value is $135 and the government should proceed with it.