A training program for high school dropouts has the following costs and effects in years 1, 2, 3, and 4. After the 4thyear, the effects go to zero (to keep the calculations simple). All these costs and benefits occur at the end of years 1, 2, 3, or 4. Assume that each crime costs $30,000 for jail costs and legal costs and inflicts $20,000 in costs to the victim. The discount rate used by the government to evaluate training programs is 10%. Calculate the present value of the program.
|
Year
|
1
|
2
|
3
|
4
|
|
Cost per student
|
$15,000
|
-
|
-
|
-
|
|
Change in earnings
|
-$10,000
|
$5000
|
$5000
|
$3000
|
|
Change in crimes/100 students
|
-3
|
-3
|
-3
|
0
|
|
Change in welfare transfers
|
0
|
-500
|
-500
|
-300
|
|
Change in taxes paid
|
-2000
|
1000
|
1000
|
500
|