5. Public Economics

Cost Benefit — Quiz

Test your understanding of cost benefit with 5 practice questions.

Practice Questions

Question 1

What is the Modified Internal Rate of Return (MIRR) for a project with an initial cost of \\1\,000 at time 0, cash inflows of \\$400 at end of year 1, \\$500 at end of year 2, and \\$600 at end of year 3, using a finance rate of 10\\% and a reinvestment rate of 5\\%?

Question 2

In a distributional cost–benefit analysis, a project yields benefits of \\300 to Group A (weight 2.0), \\200 to Group B (weight 1.0), and \\$100 to Group C (weight 0.5). What is the total weighted benefit?

Question 3

When benefits occur at mid-year points, how is the Net Present Value (NPV) of cash flows of \\$50 at mid-year 1, \\$60 at mid-year 2, and \\$70 at mid-year 3 calculated at a discount rate of 10\\%?

Question 4

A non-market environmental benefit of \\1\,000 occurs at the end of year 5. If a shadow price factor of 0.8 applies and the discount rate is 5\\%, what is its present value?

Question 5

A benefit of \\$100 is received at the end of year 20. If a declining discount rate schedule applies—5\\% for years 1–10 and 3\\% for years 11–20—what is its present value?