A school is planning to build a new playground in 2017. They received a $120,000 government grant to be used for building the playground. They hope to break ground in May 2017 and complete it by the start of school in September. Before starting the project, they must dismantle the existing playground that is unsafe based on current safety standards. They plan to complete soil testing once the existing playground is dismantled as a number of residential properties in the community have tested positive for soil contamination and are demanding a full test to ensure their children are not playing on a contaminated playground.

Estimates related to the new playground:

Cost for dismantling existing equipment	$22,000
Salvage value from the metal from existing equipment	$7,000
Soil testing	$18,000
New playground equipment	$45,000
Cost of installation	$16,000
Cost of resurfacing play area in rubber	$55,000
Cost of landscaping (including $5,000 for gravel)	$22,000
Cost of removing and replacing soil	$73,000

The costs for installation, resurfacing, landscaping, and soil removal are the costs quoted by contractors. The school was approached by the president of the student council who volunteered the council's time for installing and landscaping the new playground. This will save the school approximately $25,000 in costs and the school has accepted this offer as 2 of the council members who are helping are carpenters.

The school has two options in dealing with the contaminated soil. Option one is to not partake in the soil testing and to simply resurface the play area with poured-rubber matting that can cover the entire surface. This will costs, as indicated above, approximately $55,000. Option 2 is to perform the soil testing. A worker has estimated there is a 40% chance the soil is contaminated. if this is the case, the school will either need to resurface the area for $55,000 or it can have the contaminated soil removed and replaced for $73,000 plus the cost of gravel. However, there is a 60% chance the soil will not be contaminated.

Prepare an analysis of the potential project costs for the follow. Note: there is no need for gravel in the resurfacing scenario.

a. Resurface the ground without doing soil testing

b. complete the soil testing. there are 2 outcomes:

i. remove/replace the soil if contaminated

ii. resurface if contaminated

Use the probabilities provided by the worker to determine a weighted cost for each of outcomes

c. What option would you recommend? Why? are there other non-financial considerations needed to be included in decision?