30 points The following table shows the stream of social ben

(30 points) The following table shows the stream of social benefits (in thousand dollars) from a project of restoring pastures for wild horses in the Western Us C. Year 0 Year 1 180 50 Year 2 150 50 Year 3 120 50 Year 4 100 50 Year 5 80 50 Benefits 200 Costs 500 Compute the present value of the social benefits and costs with a discounting rate of 5%. Determine whether this project should be carried out. (Show your work to get full credit.)

Solution

Present value (PV) of Benefits is computed as follows.

Present value (PV) of costs ($\'000) = 500 + 50 x P/A(5%, 5) = 500 + 50 x 4.3295** = 500 + 216 = 716

Present value (PV) of Net benefits ($\'000) = PV of Benefits - PV of Costs = 756 - 716 = 40

Since PV of Net benefits > 0, the project should be carried out.

**From P/A Factor table

Year	Benefits ($\'000)	PV Factor @5%	Discounted Benefits ($\'000)
	(A)	(B)	(A) x (B)
0	200	1.0000	200
1	180	0.9524	171
2	150	0.9070	136
3	120	0.8638	104
4	100	0.8227	82
5	80	0.7835	63
		PV ($\'000) =	756