A county government is considering adding a new train station to an existing line, which would...
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A county government is considering adding a new train station to an existing line, which would accommodate residents of a growing sub-division of the county. County authorities have hired you and your partners trom an economic consulting firm to conduct a cost-benefit analysis of the proposed project. Relevant intomation related to the project include: 1. 680,000 total labor hours for construction Half of the labor will be hired from other jobs at a market rate of $40 per hour, while the other half will be drawm from the ranks of the unemployed, whho are willing to work for $15 per hour. 2. 1 million units of construction materials at a monopoły.market price of $70 per unit, which represents a 40% markup over marginal cost. 3. Annual maintenance costs of $3.2 million, assumed to begin at the end of the first year and to occur indefinitely into the tuture. 4. Time saving of commuters: It is ostimated thi approximately 650 local residents will save, on average, 30 minutes a day in commuting time, beginning at the end of the first year and continuing indelinitely. Current, and future, residents are assumed to work 5 days a week, 50 weeks a year, and value an hour of time at $50. 5. Lives saved: Because there will be tewer residents using their cars for commuting, it is assumed that, on average, 1.2 lives will be saved per year, indefinitely, beginning at the end of the first year. A life is estimated to be worth $2 million. Construction of the new station would be completed within the first year (i.e. assume all construction costs are current). In addiftion, tor this project, future values are discounted at 4%. 38 Questions: 34 a. Enter a formula to calculate only the construction costs (i.e. exclude maintenance costs) of the station. 35 O b. Enter a formula to calculate the present value of maintenance costs of the station over time. 1. 3 C. Enter a formula to calculate the present value of the total benefits of the station over time. d. Enter a formula to calculate the overall net benefit of the station. e. Should the county build the station? Briefly explain. A county government is considering adding a new train station to an existing line, which would accommodate residents of a growing sub-division of the county. County authorities have hired you and your partners trom an economic consulting firm to conduct a cost-benefit analysis of the proposed project. Relevant intomation related to the project include: 1. 680,000 total labor hours for construction Half of the labor will be hired from other jobs at a market rate of $40 per hour, while the other half will be drawm from the ranks of the unemployed, whho are willing to work for $15 per hour. 2. 1 million units of construction materials at a monopoły.market price of $70 per unit, which represents a 40% markup over marginal cost. 3. Annual maintenance costs of $3.2 million, assumed to begin at the end of the first year and to occur indefinitely into the tuture. 4. Time saving of commuters: It is ostimated thi approximately 650 local residents will save, on average, 30 minutes a day in commuting time, beginning at the end of the first year and continuing indelinitely. Current, and future, residents are assumed to work 5 days a week, 50 weeks a year, and value an hour of time at $50. 5. Lives saved: Because there will be tewer residents using their cars for commuting, it is assumed that, on average, 1.2 lives will be saved per year, indefinitely, beginning at the end of the first year. A life is estimated to be worth $2 million. Construction of the new station would be completed within the first year (i.e. assume all construction costs are current). In addiftion, tor this project, future values are discounted at 4%. 38 Questions: 34 a. Enter a formula to calculate only the construction costs (i.e. exclude maintenance costs) of the station. 35 O b. Enter a formula to calculate the present value of maintenance costs of the station over time. 1. 3 C. Enter a formula to calculate the present value of the total benefits of the station over time. d. Enter a formula to calculate the overall net benefit of the station. e. Should the county build the station? Briefly explain.
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Step 1 of 1 A a Construction costs are only 1 time cost So we just add up a... View the full answer
Related Book For
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn
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