The construction of a hydroelectric dam will result in the p

The construction of a hydroelectric dam will result in the permanent closure of a recreational park. The park has brought $4 million in revenues over the last two years. What is the expected total monetary loss under 4% annual interest rate if this park is permanently closed this year?

Solution

Average annual revenue = $4 million / 2 = $2 million

If the park is closed, expected total monetary loss = Annual revenue loss / Interest rate

= $2 million / 0.04

= $50 million