A city council is considering converting an old industrial lot into a public recreation center. They estimate the benefit to the community to be worth $2,000,000. Contractors have estimated a net cost to build the recreation center and to refurbish the property to be $3,100,000. Should they proceed with the project? A. 0.65 and Yes B. 0.65 and No C. 1.55 and Yes D. 1.55 and No

A city council is considering converting an old industrial lot into a public recreation center. They estimate the benefit to the community to be worth $2,000,000. Contractors have estimated a net cost to build the recreation center and to refurbish the property to be $3,100,000. Should they proceed with the project? A. 0.65 and Yes B. 0.65 and No C. 1.55 and Yes D. 1.55 and No

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter1: Introductin To Taxation

Section: Chapter Questions

Problem 6P

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A city that operates automobile parking facilities is evaluating a proposal toerect and operate a structure for parking in its downtown area. Three designs for a facility to be built on available sites have been identified as follows, where all dollar figures are in thousands: At the end of the estimated service life, the selected facility would be torn down and the land would be sold. It is estimated that the proceeds from the resale of the land will be equal to the cost of clearing the site. If the city's interest rate is known to be 10%, which design alternative would be selected on the basis of the benefit-cost criterion?
Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below. Cost of acquiring additional land for runway $ 70,000 Cost of runway construction 200,000 Cost of extending perimeter fence 29,840 Cost of runway lights 39,600 Annual cost of maintaining new runway 28,000 Annual incremental revenue from landing fees 40,000 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $100,000. The old snowplow could be sold now for $10,000. The new, larger plow will cost $12,000 more in annual operating costs. Second, the County Board of Representatives believes that the…
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The city of Columbia is considering extending the runways of its municipal airport so that commercial jets can use the facility. The land necessary for the runway extension is currently a farmland that can be purchased for $350,000. Construction costs for the runway extension are projected to be $600,000, and the additional annual maintenance costs for the extension are estimated to be $22,500. If the runways are extended, a small terminal will be constructed at a cost of $250,000. The annual operating and maintenance costs for the terminal are estimated at $75,000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of $100,000. Annual bemefits of the runway extension have been estimated as follows: Rental receipts from airlines leasing space at the facility $325,000 $65,000 Airport tax charged to passengers $50,000 $50,000 Convenience benefit for residents of Columbia Additional tourism dollars for Columbia Apply the…
The city of Columbia is considering extending the runways of its municipal airport so that commercial jets can use the facility. The land necessary for the runway extension is currently a farmland that can be purchased for $350,000. Construction costs for the runway extension are projected to be $600,000, and the additional annual maintenance costs for the extension are estimated to be $22,500. If the runways are extended, a small terminal will be constructed at a cost of $250,000. The annual operating and maintenance costs for the terminal are estimated at $75,000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of $100,000. Annual benefits of the runway extension have been estimated as follows (shown): Apply the B–C ratio method with a study period of 20 years and a MARR of 10% per year to determine whether the runways at Columbia Municipal Airport should be extended.
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Washington County's Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board's decision appear below. Cost of acquiring additional land for runway Cost of runway construction Cost of extending perimeter fence Cost of runway lights Annual cost of maintaining new runway $ 61,500 310,000 32,100 31,000 15,500 22,500 Annual incremental revenue from landing fees In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $110,000. The old snowplow could be sold now for $11,000. The new, larger plow will cost $6,500 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway, and the major jet service…
The city council wants the municipal engineer to evaluate three alternatives for supplementing the city water supply. The first alternative is to continue deepwell pumping at an annual cost of $10,500. The second alternative is to install an 18-inch pipeline from a surface reservoir. First cost is $25,000 and annual pumping cost is $7000. The third alternative is to install a 24-inch pipeline from the reservoir at a first cost of $34,000 and annual pumping cost of $5000. The life of each alternative is 20 years. For the second and third alternatives, salvage value is 10% of first cost. With interest at 8%, which alternative should the engineer recommend? Use present worth analysis.
Department of Agriculture is considering three proposals for increasing the capacity of the maindrainage canal in Baguio City.Proposal 1 requires dredging the canal. The state is planning to purchase the dredgingequipment and accessories for $650,000. The equipment is expected to have a 10-year life with a$17,000 salvage value. The annual operating costs are estimated to total $50,000. To control weedsin the canal itself and along the banks, environmentally safe herbicides will be sprayed during theirrigation season. The yearly cost of the weed control program is expected to be $120,000.Proposal 2 is to line the canal walls with concrete at an initial cost of $4 million. The lining isassumed to be permanent, but minor maintenance will be required every year at a cost of $5000. Inaddition, lining repairs will have to be made every 5 years at a cost of $30,000.Proposal 3 is to construct a new pipeline along a different route. Estimates are an initial costof $6 million, annual maintenance…
You own a construction company and have recently received a contract with the local school district to refurbish one of its elementary schools. You are given an up-front payment from the school district in the amount of $5 million. The contract terms extend from years 2018 to 2020. When would you recognize revenue for this payment? What method of accounting would you use for this construction project and why? What would be the benefits and challenges with your method selection? Give an example of your distribution selection and associated costs of the project (you may estimate based on other industry competitors). What might be some benefits and challenges associated with the other method of construction revenue recognition?
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