8-33 The owner of a downtown parking lot has employed a civil engineering consulting firm to advise him on the economic feasibility of constructing an office building on the site. Betty Samuels, a newly hired civil engineer, has been assigned to make the analysis. She has assembled the following data: Total Net Annual Total Investment* Alternative Revenue Sell parking lot Keep parking lot $ $ 200,000 22,000 Build 1-story building 400,000 60,000 Build 2-story building Build 3-story building 555,000 72,000 750,000 100,000 Build 4-story building 875,000 105,000 Build 5-story building 1,000,000 120,000 * Includes the value of the land. The analysis period is to be 15 years. For all alternatives, the property has an estimated resale (salvage) value at the end of 15 years equal to the present total investment. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the MARR is 10%, what recommendation should Betty make?
8-33 The owner of a downtown parking lot has employed a civil engineering consulting firm to advise him on the economic feasibility of constructing an office building on the site. Betty Samuels, a newly hired civil engineer, has been assigned to make the analysis. She has assembled the following data: Total Net Annual Total Investment* Alternative Revenue Sell parking lot Keep parking lot $ $ 200,000 22,000 Build 1-story building 400,000 60,000 Build 2-story building Build 3-story building 555,000 72,000 750,000 100,000 Build 4-story building 875,000 105,000 Build 5-story building 1,000,000 120,000 * Includes the value of the land. The analysis period is to be 15 years. For all alternatives, the property has an estimated resale (salvage) value at the end of 15 years equal to the present total investment. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the MARR is 10%, what recommendation should Betty make?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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