In the past, the Afram Foundation has awarded many grants to improve the living and medical conditions of people in war-torn and poverty-stricken countries throughout the world. In a proposal for the foundation's board of directors to construct a new hospital and medical clinic complex in a deprived central African country, the project manager has developed some estimates. These are developed, so she states, in a manner that does not have a major negative effect on prime agricultural land or living areas for citizens.
Award amount: $20 million (end of) first year, decreasing by $5 million per year for 3 additional years; local government will fund during the first year only
Annual costs: $2 million per year for 10 years, as proposed
Benefi ts: Reduction of $8 million per year in health-related expenses for citizens
Disbenefi ts: $0.1 to $0.6 million per year for removal of arable land and commercial districts
Use the conventional and modifi ed B/C methods to determine if this grant proposal is economically justifi ed over a 10-year study period. The foundation's discount rate is 6% per year.