Question
First, the administration is considering purchasing a gymnasium adjacent to your school. The gymnasium is for sale for $8 million and initial costing analysis has
First, the administration is considering purchasing a gymnasium adjacent to your school. The gymnasium is for sale for $8 million and initial costing analysis has revealed that to get the gymnasium up and operational would require another $2 million. The average operating cost for gymnasium would be $500,000 per year. The gymnasium is estimated to bring in $1 million (per year) for the next 10 years. The gymnasium will need a major renovation after ten years and the residual value at that time will be $9 million, considering the increase in real value of property in the area over recent history.
Applying cost/benefit analysis and lifecycle costing methods to the appropriate situations using the attached worksheets, calculate each scenario according to CBA and LCC principles. Be sure to enter outflows as negative numbers and inflows as positive numbers into the orange cells.
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