The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. The sites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, the land for a parking garage will cost $1 million, and construction costs will be $16 million for the parking garage, infrastructure relocation, and drainage. The SW site is 30 km from downtown, but the land will be donated by a developer who knows that an arena at this site will dramatically increase the value of the remainder of his land holdings. Because of its centralized location, there will be greater attendance at most of the events held at the DT site. This will result in more revenue to vendors and local merchants in the amount of $700,000 per year. Additionally, the average attendee will not have to travel as far, resulting in annual benefits of $400,000 per year. All other costs and revenues are expected to be the same at either site. If the city uses a discount rate of 10% per year, and will construct at one site or the other, which site should be selected? Use a 30-year study period. The AB/C ratio is 0.9 Select site southwest of metropolitian area

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. The
sites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, the
land for a parking garage will cost $1 million, and construction costs will be $16 million for the parking garage, infrastructure relocation,
and drainage. The SW site is 30 km from downtown, but the land will be donated by a developer who knows that an arena at this site
will dramatically increase the value of the remainder of his land holdings. Because of its centralized location, there will be greater
attendance at most of the events held at the DT site. This will result in more revenue to vendors and local merchants in the amount of
$700,000 per year. Additionally, the average attendee will not have to travel as far, resulting in annual benefits of $400,000 per year.
All other costs and revenues are expected to be the same at either site. If the city uses a discount rate of 10% per year, and will
construct at one site or the other, which site should be selected? Use a 30-year study period.
The AB/C ratio is
0.9
Select site southwest of metropolitian area ✓
Transcribed Image Text:The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. The sites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, the land for a parking garage will cost $1 million, and construction costs will be $16 million for the parking garage, infrastructure relocation, and drainage. The SW site is 30 km from downtown, but the land will be donated by a developer who knows that an arena at this site will dramatically increase the value of the remainder of his land holdings. Because of its centralized location, there will be greater attendance at most of the events held at the DT site. This will result in more revenue to vendors and local merchants in the amount of $700,000 per year. Additionally, the average attendee will not have to travel as far, resulting in annual benefits of $400,000 per year. All other costs and revenues are expected to be the same at either site. If the city uses a discount rate of 10% per year, and will construct at one site or the other, which site should be selected? Use a 30-year study period. The AB/C ratio is 0.9 Select site southwest of metropolitian area ✓
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 13 images

Blurred answer
Knowledge Booster
Cash Flow
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education