Problem
A public project is being considered by a local government that will cost $10M at the start and $8M at the end of years 1 through 5. The project is estimated to earn $20M at the end of year 2, $30M at the end of year 3 and 4, and $20M at the end of year 5. Assuming i =10%. What is the benefit-to-cost ratio for this project? Draw a cash flow diagram for the costs and benefits annually.