F. The College of Engineering is planning to put up its own laboratory building. Two proposals being considered are: AThe construction of the building now to cost P4 000 000 B The construction of a smaller building now to cost P 3 000, 000 and at the end of 5 years an extension to be added to cost P2, 000, 00O CO3 12. By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected? a P 150,000 b. P 169 000 c. P130 000 d. none of the above

F. The College of Engineering is planning to put up its own laboratory building. Two proposals being considered are: AThe construction of the building now to cost P4 000 000 B The construction of a smaller building now to cost P 3 000, 000 and at the end of 5 years an extension to be added to cost P2, 000, 00O CO3 12. By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected? a P 150,000 b. P 169 000 c. P130 000 d. none of the above

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A university is trying to determine how much it should charge for tickets to basketball games to help offset the expenses of the new arena. The cost to build the arena including labor, materials. e tc. was $92 million. Each year the maintenance cost is expected to increase by 5% as the building gets older. 1l1e maintenance cost for the first year is $150.000. Utilities arc expected to average about $200.000 per year and labor costs $300,000. The average attendance at basketball games over the year is expected to be J00.000 people (or 100.000 tickets sold to events). Assuming the arena has no other source of income besides regular ticket sales (not including student tickets) for basketball games, what should the university charge so that it can recover at least a 6% cost of borrowing on its investment? ll1c university expects the arena to be used for 40 years and 10 have no appreciable salvage value.
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