A nonprofit organization, Save the Redwoods League, in 2019 paid a private timber company $15 million for
Question:
A nonprofit organization, Save the Redwoods League, in 2019 paid a private timber company $15 million for a remote grove that contains the world’s 5th largest tree. The grove will be open to the public but it is not expected to receive many visitors due to its location. About 5000 visitors are expected to go annually, spending on average 3 days each, i.e. 15,000 "recreational visitor days" (RVDs) per year.
a. State what is the opportunity cost of establishing the grove. You do not need numbers - just state next best alternative as indicated in text.
b. Translate the purchase price into an annual value using the appropriate formula using an interest rate of 10%.
c. Using your answer in b., what is that value per RVD per year and do you think it likely that visitors will pay that amount per RVD?
d. If hiking and recreation are the only use of the public grove, do you think it likely that purchasing the grove was efficient?
e. What are justifications for buying the grove beyond hiking and recreation? Refer to use value categories we have covered in class.
f. If there are 100 million households in the US, how high would annual WTP per household have to be to justify the purchase of this grove for the public, disregarding the recreational visitor day values. Base your answer on benefits from WTP per household only.
Business Law Principles and Practices
ISBN: 978-1133586562
9th edition
Authors: Arnold J. Goldman, William D. Sigismond