Economics 3220 Lecture Notes - Social Discount Rate, Net Present Value, Opportunity Cost

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2 Mar 2013
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Suppose the government of alberta proposed to reduce sox emissions from. 265 to 265 kilotonnes over a 20 year period. Estimates of costs and benefits of the proposed program are in the table. Calculate the net benefits to see if the program is economically viable. For many projects, benefits and costs occur in the future: usually, costs occur in the near future, benefits occur in the distant future. However, decisions to accept or reject a project are made in the current time (t=0) period. Since future benefits and costs are worthless in the current time period, we need to find a way to calculate how much they are worth in the current time this is called present value (pv) calculations. Discounting future benefits and costs is a way to calculate their present values (pv) It is the opposite of compounding or calculating future values (fv) of current investments.

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