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Consider an environmental regulation that will incur costs of $19,000 in the current

year. Health benefits of $8,000 will be realized one year from now and another $9,000

benefit two years from now. If the discount rate is 9 percent, what is the present value

of net benefits?

pur-new-sol

Computation of Present Value of Net Benefits:
Year	Net Benefits	PVIF @9%	Present Value of
	(a)	(b)	*Net Benefits (ab)**
0	-$18,000.00	1	-$18,000.00
1	$8,000.00	0.917431193	$7,339.45
2	$9,000.00	0.841679993	$7,575.12
		Total Present Value	-$3,085.43

Workings:

PVIF @9%

=1/(1+9%)^0

=1/(1+9%)^1

=1/(1+9%)^2

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