Suppose that the county you live in is considering building a public swimming pool. If the project
Question:
Suppose that the county you live in is considering building a public swimming pool. If the project is successfully completed, the county will receive a State grant to cover some of the costs as detailed in the table below, in which analysts have monetized the following potential costs and benefits for the expected useful life of the pool:
Monetized Value (millions of dollars) | |
State grant for building a public pool: | $5 |
Construction costs: | $25 |
Personnel and maintenance costs: | $16 |
Revenue from county residents paying to use the pool: | $18 |
Revenue from non-residents paying to use the pool: | $4 |
County resident value (willingness-to-pay) from using the pool: | $30 |
Non-resident value (willingness-to-pay) from using the pool: | $6 |
Assume that the State grant is only available to the county to build a pool, the construction costs will have to be done by an out-of-county firm (since no county-based companies have pool construction capabilities), and the personnel and maintenance jobs will be filled by county residents.
a. Assuming national-level standing, what are the net social benefits of the project?
b. Assuming county-level standing, what are the net social benefits of the project?
c. How does the definition of standing impact the estimates you calculated in parts a. and b.?
d. In general, how do the guardian and spender perspectives deviate from the economic analyst perspective?
e. Calculate the net benefits from the perspective of a guardian in the county budget office. How does the guardian estimate differ from your calculations in parts a. and b. above? Why?
f.Calculate the net benefits from the perspective of spender in the county recreation department. How does the spender estimate differ from your calculations in parts a. and b. above? Why?
Essentials Of Corporate Finance
ISBN: 9780073405131
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan