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<br />57 <br /> <br />Step, 11 - I-'i scount [3enefits and Costs ,~,pyrop,'iately <br /> <br /> <br />Selection 01 an al'Ptopl'iate discount \'ate is il[101'tilnt. The dis- <br /> <br /> <br />count I-ate wi 11 biels the analysis and Inay ch,lncle the l-eCOllunended alter- <br /> <br /> <br />native, Selection should reflect at least the cost of borrowed <br /> <br /> <br />capital for the entities involved. In this exalni'll', the l'l'collilnended <br /> <br /> <br />value of the ,,'ater Resources Council uf 5-7/8 per vcar fOl- fiscal yeal' <br /> <br /> <br />1975 vias used. Appendix G provides additional infomation on the selection. <br /> <br /> <br />The selection of time horizon 01' planninq period should be bilsed <br /> <br /> <br />upon the physical' ife of the illl[ll'OVell1ents vlIlich vlill prevent or contl-ol <br /> <br /> <br />flooding, If the il1pniVements h"ve a uselu] ] He \'Iili, h is less than the <br /> <br /> <br />design recun-ence interval of the level of p,-otection and the analyst <br /> <br /> <br />vlishes to extend the ileA to that point, IL is necessary to Sil0\'1 replace- <br /> <br /> <br />ment of the facilities as a pmject cost. Hirlh inflation 1l1akes this <br /> <br /> <br />procedure uncertain, For this example il 50-year project life was chosen, <br /> <br /> <br />Tilis corresponds to Corps procedures, <br /> <br /> <br />Comparison of benefits and costs IllUSt be made for the same time <br /> <br /> <br />frame, Benefits s temmi ng from reduced fl ood damages occurri no annually <br /> <br /> <br />over the life of the project cannot be compared directly with construction <br /> <br /> <br />costs which occur over il short period of tillle at the beginnino of the <br /> <br /> <br />project. All benefits ilnd costs must be converted to eitiler present or <br /> <br /> <br />annual amounts before comparison, using appropriate interE'st factors, <br /> <br /> <br />which account for the time value of money, <br /> <br /> <br />Step ,1 ,2- _Di,spl,<lY _lJ_e!1.E'0t-<:os_tini2-l^Inati on <br />Display of alternatives is pOSSible vlith a number of methods, <br />including the beneFit-cost riltio, net benefit, incremental rate-of- <br />return and minimization of total costs. For simplIcity, the net <br />benefit method is highlighted in this document. <br />