Mid-sized Reunion City plans to completely renovate its aging shopping mall. The city depends on sales tax revenues of 3 percent of sales at the mall to fund many city services, but sales at the mall have declined to a current $80 million. Reunion City’s plans call for 20 percent annual growth in sales at the mall after renovation, which will take one year unless the neighboring city of Pleasantville attracts a WalMart Superstore. In that case, Reunion City’s mall might experience only 5 percent annual growth.

The mall’s sales tax revenues will decline 25 percent from its current level during the renovation period.

Required

a. Compute Reunion City’s sales tax revenues after the renovation without competition from Pleasantville.

b. Compute Reunion City’s sales tax revenues after the renovation with competition from Pleasantville