The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. Thesites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, theland for a parking garage will cost $1 million, and construction costs will be $14.00 million for the parking garage, infrastructurerelocation, and drainage. The SW site is 30 km from downtown, but the land will be donated by a developer who knows that an arenaat this site will dramatically increase the value of the remainder of his land holdings. Because of its centralized location, there will begreater attendance at most of the events held at the DT site. This will result in more revenue to vendors and local merchants in theamount of $550,000 per year. Additionally, the average attendee will not have to travel as far, resulting in annual benefits of $400,000per year. All other costs and revenues are expected to be the same at either site. If the city uses a discount rate of 8.00% per year, andwill construct at one site or the other, which site should be selected? Use a 30-year study period. (Round the final answer to threedecimal places.)The AB/C ratio isSelect site (Click to select)

Cost-benefit analysis is a method used to evaluate the potential costs and benefits of a project or…

Answered: The AB/C ratio is Select site (Click to…

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The AB/C ratio is Select site (Click to select)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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