A proposed water project has an initial cost of $$ \$2,000,000 $ and is expected to generate annual net benefits of $ \$250,000 $ for 15 years. If the discount rate is $ 7\% $$, what is the approximate Net Present Value (NPV) of the project? (Assume benefits occur at the end of each year, and use the formula for the present value of an annuity: $$ PV = P \times \frac{1 - (1 + r)^{-n}}{r} $ where $ P $ is the annual payment, $ r $ is the discount rate, and $ n $$ is the number of periods.)
Question 2
When evaluating a water project, what is the primary distinction between 'financial analysis' and 'economic analysis'?
Question 3
In the context of economic evaluation for water projects, what is the 'internal rate of return' (IRR) and what does it signify?
Question 4
A government is considering a project to build a new reservoir. The project will provide water for irrigation, hydropower, and municipal supply, but will also flood a significant area of agricultural land and displace several communities. In a comprehensive economic evaluation, how should the displacement of communities and loss of agricultural land be primarily categorized and treated?
Question 5
Which of the following best describes the 'hedonic pricing method' for valuing ecosystem services related to water quality?
