The Initial Cost of Constructing a Flood Control Dam Is

Essay

The initial cost of constructing a flood control dam is estimated to be $5 million, with annual upkeep costs of $340,000. Annual benefits (e.g., reduced flood damage, agricultural development, and tourism, etc.) are expected to be $1.25 million, whereas the disbenefits from significant ecological and human social changes are expected to be $0.025 million per year. Assume the dam will have a useful life of 53 years. At an interest rate of 17% per year, should the dam be constructed on the basis of its conventional B- C ratio, with AW as the equivalent- worth measure?