Part III:

The Government of Guatemala is proposing the development of a theme park for children on a 3,000 hectare land. The land proposed for the theme park belongs to members of a rural community whose livelihoods depend on the use of the land to produce bananas.

The land is currently used solely for banana production. Banana yields (production per hectare) in the area is 5.5 tonnes per ha. Guatemala is a net exporter of bananas and exports bananas to the US. The CIF at the Gulf port in the US is $200 per tonne. There are no export taxes

Assume freight, insurance and unloading (FIU) cost at the US Gulf Port is $15 per tonne. Assume also that landing and port charges (LP) at US Gulf Coast is $15 per tonne. Assume local transport and marketing costs (TM) to point of export in Guatemala is 75 Quetzals per tonne. Local storage, transport and marketing costs (ST) is 50 Quetzals per tonne.

The Guatemalan government is proposing to purchase the land from the community at a cost of 10,000 Quetzals per hectare

The government is also proposing to use 100 people in the rural community to provide the needed labour for the theme park. Such people are currently working on banana farms with a marginal value product of 10 Quetzals per hour per person. There are no minimum wages and no welfare programs in the area.

Initial total construction and infrastructure cost is estimated at 12 million Quetzals. Construction is expected to be completed in the initial year.

The estimated maintenance cost is 5,000,000 Quetzals per year beginning from the 1st year of operation.

Management cost per year is expected to total 8,000,000 Quetzals beginning from the 1^st year of operation.

The use of the land for the theme park creates environmental problems such as noise, loss of biodiversity and soil compaction estimated at 50% of maintenance cost per year.

It is estimated that there will be on average 100,000 visitors per week to the park and each visitor is willing to pay 20 Quetzals per visit. The park will be operating for 30 weeks in a year.

US$1 = 7.65 Quetzals. The Quetzal is said to be 10% undervalued

Assume the projects life span is 15 years

Assume a discount rate of 8%

Please answer the following questions with the above information

With a spreadsheet estimate

The Present Value Cost

The present Value Benefits

With the following criteria, determine whether the project is economically feasible

Net Present Value Criteria

Benefit Cost Ratio

***PLEASE ATTACH YOUR SPREADSHEET TO YOUR ANSWER