1011quiz3_rev

1011quiz3_rev - 1.011 Project Evaluation Part IV Carl D....

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1.011 Project Evaluation – Part IV Carl D. Martland Review Evaluating CEE Projects Sample Problems Benefits of investment Figure 1 shows supply and demand curves for housing in 2002 in a city where the housing supply is rather limited. The city is considering a major program to encourage new housing construction by offering tax breaks to developers, making land available at very low cost, and constructing housing for the elderly. A study by real estate consultants estimates that this program will shift the supply curve to S1, which is also shown in the figure. a. Estimate the total annual benefits to residents from lower housing costs if the program is implemented. b. What other benefits might be achieved by this program? Supply & Demand for Apartments 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Supply 0 Supply 1 Demand 90,000 100,000 110,000 120,000
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Sensitivity Analysis A city wants to build a new bridge to relieve congestion. The mayor wants a private company to build and operate the facility, which is expected to cost $100 million to construct and $1 million per year to operate. If demand projections are correct, there will be 20,000 cars/day (total of inbound plus outbound) using the bridge and the average savings will be about 10 minutes each
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1011quiz3_rev - 1.011 Project Evaluation Part IV Carl D....

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