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controlling “pests” = $3.5-million each year.
Let the discount rate be 5 percent. The municipality’s planning horizon is 10 years. Suppose the present value of the benefits of the project are $40-million. Which project should the municipality adopt?
Assume now that the benefits differ by the type of treatment option chosen. In particular, they remain at a present value of $40-million for the pesticide ban, but there would be additional benefits in the form of less damage to ecosystems from the treatment plant. How high would these benefits have to be each year to make the government indifferent between choosing the treatment plant or the pesticide ban?
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