Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of $1,800,000. Addition of new species will cost another $310,000. Additional maintenance, food, and animal care and replacement will cost $145,000 in the first year, increasing by 3% each year thereafter. The zoo has been in operation since 1868 and is expected to continue indefinitely; however, it is common to use a 20-year planning horizon on all new investments. Salvage value on facilities after 20 years will be 40% of initial cost. Interest is 7%. An estimated 1.5 million visits per year are made to the zoo, and the cost remains free year-round. How much additional benefit per visit, on average, must the visitors perceive to justify the renovation?
Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of $1,800,000. Addition of new species will cost another $310,000. Additional maintenance, food, and animal care and replacement will cost $145,000 in the first year, increasing by 3% each year thereafter. The zoo has been in operation since 1868 and is expected to continue indefinitely; however, it is common to use a 20-year planning horizon on all new investments. Salvage value on facilities after 20 years will be 40% of initial cost. Interest is 7%. An estimated 1.5 million visits per year are made to the zoo, and the cost remains free year-round. How much additional benefit per visit, on average, must the visitors perceive to justify the renovation?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
