IBUS, MGMT

Week 7 Term Project: Doonsey Dam Project

Purpose

The purpose of this assignment to write a research-based paper about the economic impact of global climate change, including a Cost-Benefit Analysis (CBA) for a planned dam project.

Complete instructions and Excel CBA worksheet

Section 1: Cost-Benefit Analysis

The city of Doonsey is planning a large dam project. As part of its financing, the city has submitted an application to the World Bank. You have been asked to make recommendations to the World Bank whether or not this project is worth funding. For Section 1, perform a Cost-Benefit Analysis (CBA) for the Doonsey Dam project.

CBA Scenario A

Do a formal CBA encompassing all of the quantifiable factors listed above. Assume that the lifespan of the dam is 30 years. As in the example in Table 7.5, assume that construction begins now (in Year 0). All other impacts start once the dam is completed (in Year 3) and continue for 30 years (until Year 32). Use two possible discount rates: 8 percent and 5 percent. For each rate, what is the present value of the dam’s benefits and costs? What are your policy recommendations for each discount rate? Remember that there are also unquantified impacts.

CBA Scenario B

Now consider an alternative project: a number of smaller dams constructed so as not to flood significant agricultural or forest lands. For this project, total construction costs are exactly half the costs of the big dam project (but still over a three-year period), operating costs are unchanged, and power/irrigation benefits are also half as much. But there is no damage to farmland or forest, and there are no ecological or resettlement costs. Conduct a CBA of this project, again using a 5 percent and an 8 percent discount rate. What is the present value of this scenario’s costs and benefits at each discount rate?

CBA Conclusion and Recommendations

Considering all your results, what are your policy recommendations? Do you prefer building the one large dam or the several smaller dams? Finally, which discount rate, 5 percent or 10 percent, do you think is most appropriate for your CBA? Why?

Section 2 – Impact of Agricultural Productivity and Global Warming

Discuss two effects agricultural productivity and global warming would have on regional and national economies, as well as world trade. Does global climate change lead to economic loss? Explain your answer.

Section 3 – Doonsey Dam Project

Would your decisions in Section 1 change based on your findings in Section 2? Why or why not? How would a go-ahead for the dam project possibly benefit or damage a neighboring country already affected by global warming? Watch the two short videos about the Aral Sea in the Week 10 video folder. What can we learn from the Aral Sea situation that can be applied to the Doonsey dam project?

When Answering questions, it can be a short brief paragraph. So, with these questions for writing will be a page is fine!

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Format

CBA Format

Please use the Excel form provided. You need to enter in values and formulas in order to do the necessary calculations for Scenarios A and B. The Conclusion can be written in MS Word or in the Excel spreadsheet. Be sure to refer to concepts discussed during the course.

Paper Format

Your paper should be five to seven pages long (not including your Excel calculations), double-spaced, and should cite at least three credible sources found through the JWU Library or Internet research. Citations should follow MLA format. For a refresher on MLA format, please visit the MLA Resources section in the Syllabus & Course Info area.

CBA Hints

See APPENDIX 7.1: Using Excel to Perform Present Value Calculations in your textbook for how to set up the formulas needed to calculate the cost benefit analysis.

Some costs and benefits of the project (dollar values) are as follows:

Cost or Benefit	Amount
Construction costs	$600 million per year for three years
Operating costs	$50 million per year
Hydropower to be generated	4 billion kilowatt hours per year
Price of electricity	$0.04 per kilowatt hour
Irrigation water available from dam	5 billion gallons per year
Price of irrigation water	$0.02 per gallon
Agricultural product lost from flooded lands	$60 million per year
Forest products lost from flooded lands	$20 million per year

There are also additional, less easily quantifiable, losses:

· human costs to villagers who will be forced to move

· watershed damage

· ecological costs of habitat destruction

It is also possible that the new lake area may contribute to the spread of water-borne diseases.

Submission Instructions

Make sure that all documents are attached prior to submitting your project. Once submitted, you cannot add any additional documents.

Grading Criteria

This project is graded out of 100 points.

IBUS4055