The City Council of Anderson Is Evaluating Several Projects

Essay

The city council of Anderson is evaluating several projects. A consensus has been reached to appropriate funds for the two projects with the highest net present value. The discount rate is 8% and the benefits from the projects are expected to continue indefinitely. Based on the information given in the table, which projects should be funded?
$\begin{array} { | c | c | c | } \hline \text { Project } & \text { Annual benefits } & \text { Capital exp enditures } \\\hline \text { Sidewalk ramps } & \$ 100,000 & \$ 450,000 \\\hline \text { Street paving } & \$ 600,000 & \$ 5,000,000 \\\hline \text { Hockey arena } & \$ 300,000 & \$ 4,000,000 \\\hline\end{array}$