Exam 4

This exam is due 12/6/2013 at 9:00 a.m. Each question is valued equally.

Explain the concept of Net Present Value techniques to determine the viability of an environmental project. In your answer discuss these specific ideas.
- What are net present value calculations?
- Demonstrate how a projects net value would be calculated if:
  - r = .05
  - Costs = $1,000,000 in years 1 - 10 with an annual cost thereafter of $50,000. A project retirement cost of $1 billion in year 60.
  - Benefits = $0 for the first 5 years, $100,000 in years 6 - 10, and $500,000 in years 11 - 59. Zero benefit in year 60.
  - Is the above project a viable project. Show calculations and explain.
- How does the choice of the discount rate affect the viability of a project with:
  - costs heavily weighted toward the beginning and benefits heavily weighted toward the end of a project.
  - costs heavily weighted toward the end and benefits heavily weighted toward the beginning of a project.
- Explain why net present value techniques are inappropriate analytical tools for long-term projects. For example, a national park that is estimated to last for 1,000 years with increasing nominal values each year.

2. Read this article http://usnews.nbcnews.com/_news/2013/11/22/21581139-eagle-deaths-at-wind-turbine-farm-duke-energy-agrees-to-pay-1-million?lite and then discuss, in detail, the costs and benefits of wind power. Specifically discuss the costs of bird mortality and how that might be measured in both user and existence value. Then discuss the strengths and weaknesses of using net present value calculations to determine the viability of wind power in this specific case.

3. Discuss the concept of sustainable growth. In your discussion, explain why the current predominant energy sources are non-renewable and then list and explain the currently possible renewable energy sources that can move humanity toward sustainable growth. Also discuss why we are likely to move gradually in this direction rather than a sudden disruptive move.