US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost US Airways $375,000. The airline is considering building a new training center on this land. US Airways determined that the proposal the new facility is acceptable if the original cost of the land is used in the analysis, but the proposal does not meet the airline’s project acceptance criteria if the land cost is above $850,000. A developer recently offered US Airways $2.5 million for the land. Explain fully if US Airways should build the training facility at this location or not.
US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost US Airways $375,000. The airline is considering building a new training center on this land. US Airways determined that the proposal the new facility is acceptable if the original cost of the land is used in the analysis, but the proposal does not meet the airline’s project acceptance criteria if the land cost is above $850,000. A developer recently offered US Airways $2.5 million for the land. Explain fully if US Airways should build the training facility at this location or not.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 1E
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US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost US
Airways $375,000. The airline is considering building a new training center on this land. US Airways
determined that the proposal the new facility is acceptable if the original cost of the land is used in the
analysis, but the proposal does not meet the airline’s project acceptance criteria if the land cost is above
$850,000. A developer recently offered US Airways $2.5 million for the land.
Explain fully if US Airways should build the training facility at this location or not.
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