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The chief ranger of the state's Department of Natural Resources is considering a new plan for ghting forest res in the state's forest lands. The
The chief ranger of the state's Department of Natural Resources is considering a new plan for ghting forest res in the state's forest lands. The current plan uses eight firecontrol stations, which are scattered throughout the interior ofthe state forest. Each station has a fourperson staff, whose annual compensation totals $350,000. Other costs of operating each base amount to $250,000 per year. The equipment at each base has a current salvage value of $270,000. The buildings at these interior stations have no other use. To demolish them would cost $25,000 each. The chief ranger is considering an alternative plan, which involves four firecontrol stations located on the perimeter of the state forest Each station would require a six-person staff, with annual compensation costs of $450,000. Other operating costs would be $260,000 per base. Building each perimeter station would cost $350,000. The perimeter bases would need helicopters and other equipment costing $650,000 per station. Half of the equipment from the interior stations could be used at the perimeter stations. Therefore, only half of the equipment at the interior stations would be sold if the perimeter stations were built. The state uses a 10 percent hurdle rate for all capital projects. The chief ranger has decided to use a 10year time period for the analysis. 1. Use the incrementalcpst approach to prepare a netpresentvalue analysis of the chief ranger's decision between the interior re cpntrol plan and the perimeter fire-control plan. {Round your final answers to the nearest whole dollar.) :l
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