Owing to perennial complaints by students and faculty about the lack of parking spaces on campus,...

 

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Owing to perennial complaints by students and faculty about the lack of parking spaces on campus, a parking garage on university-owned property is being considered. Since there are no university funds available for the project, it will have to pay for itself from parking fee over a 15-year period. A 10% minimum rate of retum is deemed reasonable for consideration of how large the structure should be. Based on the income and cost data shown below, determine how many levels should be built. Cumulative Construction costs $600,000 $2,200,000 $3,600,000 $4,800,000 Annual Operating Cost $35,000 $60,000 $80,000 $95,000 Income per No. of levels Year $100,000 $350,000 $570,000 $810,000 2 4 Owing to perennial complaints by students and faculty about the lack of parking spaces on campus, a parking garage on university-owned property is being considered. Since there are no university funds available for the project, it will have to pay for itself from parking fee over a 15-year period. A 10% minimum rate of retum is deemed reasonable for consideration of how large the structure should be. Based on the income and cost data shown below, determine how many levels should be built. Cumulative Construction costs $600,000 $2,200,000 $3,600,000 $4,800,000 Annual Operating Cost $35,000 $60,000 $80,000 $95,000 Income per No. of levels Year $100,000 $350,000 $570,000 $810,000 2 4

Answer rating: 100% (QA)

We shall calculate the Net Present Value at each level and then choose the level at which this value ... View the full answer