The environmental protection agency of a county would like to preserve a piece of land as a wilderness area. The owner of the land will lease the land to the county for a 20-year period for the sum of SI 750 000, payable immediately. The protection agency\ estimates that the land will generate benefits of $150 000 per year, but they will forgo S20 000 per year in taxes. Assume that the ALARR for the county is 5%.
(a) Calculate a BCR using annual worth and classify the forgone taxes as a cost to the government.
(b) Repeat part (a), but consider the forgone taxes a reduction in benefits.
(c) Using your results from part (b), determine the most the county would be willing to pay for the land (within $10 000) if they accept projects with a BCAI of one or more.