Question
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?
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