Why is it important to use the present discounted value of future revenues or expenditures when making an investment or public budgeting decision?
A new public works project requires 200,000 hours of labor to complete. If the labor market is competitive and the market wage is $15/hour, what is the opportunity cost of the labor employed? Suppose there is unemployment among workers and some workers would be willing to work for $10/hour. If half of the labor hours are completed by the previously unemployed workers, what is the opportunity cost of the labor employed?
Your employer asks you to calculate the present value for a project that will result in an immediate financial return of $100, a return of $200 after one year, and a return of $300 in the second year. Assuming you use 7% as the interest rate and 3% as the rate of expected inflation, what is the present value?