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4. [6 pts total] A city council member in Youngstown, OH is arguing that the...

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4. [6 pts total] A city council member in Youngstown, OH is arguing that the city should work to attract a major developer to build luxury condos in downtown Youngstown instead of in a neighboring suburb, as the developer had originally planned. To do this, the council member proposes that the city offer the developer 2 years of tax abatements (a cost to the city), to begin at the end of year 1, in an annual amount of $4 million dollars. The councilor estimates the benefits to the city produced by attracting wealthier families into the city limits and taxing their income-will generate S2 million in municipal revenue annually beginning at the end of year 3. Assume a discount rate of 9% and a decision time horizon of 5 years (that is calculate the NPV for 5 years). a. Calculate the NPV for this project. SHOW YOUR WORK FOR PARTIAL CREDIT. [5 pts] b. Should this proposal be supported? CIRCLE ONE [1 pt] YES NO 1

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