The Following Information Relates to Three Mutually Exclusive Projects REQUIRED:
Compute the Net Present Value of Each Project at \text

question 47

Essay

The following information relates to three mutually exclusive projects.
$\begin{array}{lrrr}& \text { Project } A & \text { Project B } & \text { Project C } \\\text { Initial cash outlay } & \$ 40,000 & \$ 40,000 & \$ 40,000\\\text { Net cash inflows: }\\\text { Year }1 & 3,000 & 16,000 & 12,000 \\2 & 7,000 & 13,000 & 12,000 \\3 & 11,000 & 10,000 & 12,000 \\4 & 15,000 & 7,000 & 12,000 \\5 & 19,000 & 4,000 & 12,000 \\\text {salvage value Year 5 } & 8,000 & \mathrm{Nil} & 2,000\end{array}$
REQUIRED:
Compute the net present value of each project at a discount rate of 10%.

Recognize the role of government-granted monopolies and their impacts on markets.

Understand the calculation and significance of marginal revenue.

Appreciate the economic rationale behind different pricing practices.

Understand the principles of marginal-cost and average-cost pricing in the context of regulated natural monopolies.

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Definitions:

Consumer Surplus

Consumer surplus is the difference between the total amount consumers are willing and able to pay for a good or service and the total amount they actually pay.

Tax Revenues

The income received by the government from taxes imposed on individuals and businesses, used to fund government activities and public services.

Deadweight Loss

A decrease in economic efficiency arising when a good or service fails to attain or cannot possibly attain equilibrium.

Deadweight Losses

Economic inefficiencies that occur when equilibrium in a market is not achieved or when market allocation of resources is not optimal, often due to externalities or government intervention.