Question
The city of Potatosville is considering two options for an amusement park at the heart of the city. The cost estimates for these options are:
The city of Potatosville is considering two options for an amusement park at the heart of the city. The cost estimates for these options are:
Description | Project A | Project B
Initial Cost | $5,000,000 | $6,000,000
Annual Operating Cost | $300,000/yr | $350,000/yr
Overhaul at the End of Years 2 & 4 | -- | $60,000
Overhaul at the End of Year 5 | $120,000 | --
Salvage Value | $200,000 | $250,000
Project Life | 8 years | 6 years
MARR | 10% | 10%
a) Calculate the EUAC of Project A
b) Calculate the EUAC of Project B
c) Which alternative should be selected? Why?
d) If the city expects 200,000 tourists to visit the park every year, what should the minimum ticket price be per visitor?
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