Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

we received a $120,000 government grant for building playground They are hoping to break ground in May 2017 and complete bySeptember. Before they can start

we received a $120,000 government grant for building playground

They are hoping to break ground in May 2017 and complete bySeptember.

Before they can start the project, however, they must dismantle the existing playground

They are also planning to complete soil testing once the existing playground is dismantled

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

school was approached Josh Schwinn, who has volunteered the council's time for installing and landscaping the new playground. This will save the school approximately $25,000 in costs the two will be helping are journeymen carpenters.The school has two options in terms of dealing with the contaminated soil. The first option is to not partake in the soil testing and to simply resurface the play area with a poured-rubber matting that can cover the entire play surface. This will cost approximately $55,000 - a large chunk of the playground budget. The other option is to perform the soil testing. A municipal worker has estimated that there is a 40% chance that 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 a hefty cost of $73,000 plus the cost of gravel. However, there is a 60% chance that the soil will not be contaminated.

Please help explain how to process the analysis of the potential project costs for the following scenarios. Note: There is no need for gravel in the resurfacing scenario.

a)Resurface ground without doing soil testing.

b)Complete the soil testing.In this case there are two outcomes:

i.remove/replace the soil if contaminated.

ii.resurface if contaminated.

c) use the probabilities provided by the municipal worker to determine a weighted cost for each of these outcomes.

d)What option would you recommend for the school?Why? Are there other non-financial considerations that you need to include in your decision?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Financial Accounting

Authors: Carl S Warren, James M Reeve, Jonathan Duchac

11th Edition

0538480920, 9780538480925

More Books

Students also viewed these Accounting questions

Question

Do not pay him, wait until I come

Answered: 1 week ago

Question

Do not get married, wait until I come, etc.

Answered: 1 week ago

Question

Do not come to the conclusion too quickly

Answered: 1 week ago