Foundation Calculations (SHOW ALL WORK)

A foundation is considering funding a health intervention project that has been proposed by a local hospital. The foundation will base its decision about whether or not to fund the project strictly by considering the project’s financial benefits and costs. The project costs are $5 million at project inception (Year 0) plus $1 million per year in Years 1, 2, 3, 4 and 5. The present value of project benefits is estimated to be $8.5 million. At a 10% discount rate, should the foundation fund this project, or reject it? [“Year 0” means today (the project’s inception), “Year 1” means one year from today “Year 2” means 2 years from today, and so on.] VERY IMPORTANT: SHOW ALL WORK (that is, the calculations and formulas that you use to obtain your answer. Do NOT simply give your final answer.

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