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.