Question

In: Finance

A town’s recreation department is trying to decide how to use a piece of land. One...

A town’s recreation department is trying to decide how to use a piece of land. One option is to put up basketball courts with an expected life of eight years. Another is to install a swimming pool with an expected life of 24 years. The basketball courts would cost $180,000 to construct and yield net benefits of $40,000 at the end of each of the eight years. The swimming pool would cost $2.25 million to construct and yield net benefits of $170,000 at the end of each of the 24 years. Each project is assumed to have zero salvage value at the end of its life. Required: Using a real discount rate of 4 percent, which project offers larger net benefits?

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A town’s recreation department is trying to decide how to use a piece of land. One...
A town’s recreation department is trying to decide how to use a piece of land. One option is to put up basketball courts with an expected life of eight years. Another is to install a swimming pool with an expected life of 24 years. The basketball courts would cost $180,000 to construct and yield net benefits of $40,000 at the end of each of the eight years. The swimming pool would cost $2.25 million to construct and yield net benefits...
Suppose a community is trying to decide on the size of a parks and recreation department....
Suppose a community is trying to decide on the size of a parks and recreation department. The community has 5 individuals, denoted by A, B, C, D, and E. To pay for the department, each individual will be taxed $20 for each worker the department employs. The individuals have the following (inverse) demands for a parks and recreation department of size L: pA = 70 − 10L pB = 60 − 10L pC = 30 − 10L pD = 20...
A county is considering using a piece of parkland for one of two alternative recreation projects....
A county is considering using a piece of parkland for one of two alternative recreation projects. Project S would require construction costs of $2 million (year 0) and generate net benefits of $1 million per year for 10 years. (Assume the benefits are realized at the ends of years 1 through 10). Project L would require construction costs of $15.5 million and generate net benefits of $2 million per year for 20 years. (Assume the benefits are realized at the...
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed...
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $505,000 to purchase, and maintenance costs would be $20,300 per year. After five years, Emerson estimates it could sell the equipment for $100,500. If Emerson leases the equipment, it would pay $151,900 each year, which would include all maintenance costs. Emerson’s hurdle rate is 15%. (Future Value of $1, Present Value of $1, Future Value...
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed...
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $502,000 to purchase, and maintenance costs would be $20,700 per year. After five years, Emerson estimates it could sell the equipment for $100,800. If Emerson leases the equipment, it would pay $152,000 each year, which would include all maintenance costs. Emerson’s hurdle rate is 15%. a. What is the net present value of the cost...
In Fulbright County, the Parks and Recreation Department constructed a library in one of the county’s...
In Fulbright County, the Parks and Recreation Department constructed a library in one of the county’s high growth areas. The construction was funded by a number of sources. Below is selected information related to the Library Capital Project Fund. All activity related to the library construction occurred within the 2017 fiscal year. Required Prepare a journal entry for capital projects fund and governmental activities at the government-wide level. (If no entry is required for a transaction/event, select "No Journal Entry...
In Fulbright County, the Parks and Recreation Department constructed a library in one of the county’s...
In Fulbright County, the Parks and Recreation Department constructed a library in one of the county’s high growth areas. The construction was funded by a number of sources. Below is selected information related to the Library Capital Project Fund. All activity related to the library construction occurred within the 2017 fiscal year. Required Prepare a journal entry for capital projects fund and governmental activities at the government-wide level. (If no entry is required for a transaction/event, select "No Journal Entry...
John from One Source Credit is trying to decide how many machines to buy. The processing...
John from One Source Credit is trying to decide how many machines to buy. The processing time is 7.5 minutes per customer. One machine will have total fixed costs of $5,300 per day, two machines will have total fixed costs of $9,800 per day. Variable costs are $40 per customer, revenue is $80 per customer. 1. Determine the break-even point for one machine. a. 89 Customers per Day b. 133 Customers per Day c. 128 Customers per Day 2. Determine...
A company is trying to decide between making or buying a component in one of their...
A company is trying to decide between making or buying a component in one of their products. The fixed and variable costs for both options are given below: Cost                                                           Make Option                                  Buy Option Fixed Cost                                                   $25000                                             $3000 Variable Cost                                                 $8                                                     $12 a. Find the break-even quantity and the total cost at the break-even point. b. If the requirement is 4,500 units, is it more cost-effective for the firm to buy or make the components? What is the cost savings...
A state highway department is trying to decide whether it should “hot-patch” a short section of...
A state highway department is trying to decide whether it should “hot-patch” a short section of an existing country road or resurface it. If the hot-patch method is used, approximately 300 cubic meters of material would be required at a cost of $700 per cubic meter (in place). Additionally, the shoulders will have to be improved at the same time at a cost of $24,000. These improvements will last 2 years, at which time they will have to be redone....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT