10. Suppose an environmental policy proposal is estimated to yield
benefits of $100 in year 2 and costs $100 in year 1 and $50 in year
2. Assuming a nominal discount rate of 10 percent, evaluate the fea-
sibility of the proposal using the relevant decision criteria. Interpret
your findings.
Ans: PV(Benefits) = $82.64
PV(Costs) = $132.23
Benefits/Costs ratio < 1
PV(Net Benefits) < 0
Hence, policy is not feasible.
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