Question

Chapter 04, Problem 036 (Video Solution) The Oklahoma City Zoo has proposed adding to their web site a major segment providing a virtual tour of the grounds and animals, suitable for both routine enjoyment and educational purposes in classrooms. Survey data indicate that this will have either a neutral or positive effect upon actual zoo attendance. The Web site will be professionally done and have an initial cost of $305,000. Upkeep, refreshing the videos, and developing videos for scientific research and entertainment will cost another $80,000 per year. The zoo is expected to be in operation for an indefinite period; however, a study period of only 10 years for the Web site is to be assumed, with only a residual (salvage) value of $63,000 for the archival value being anticipated. Interest is 7%. An estimated 90,000 persons will visit the e-zoo in the first year, increasing by 27,500 each year, and they will receive, on the average, an additional $0.70 of benefit per visit when the new area is complete. Click here to access the TVM Factor Table Calculator Step 1 Calculate benefit-cost ratio and benefits minus costs. B/C Round answer to 3 decimal places. The tolerance is + 0.1. B-C s Round answer to nearest whole dollar. The tolerance is + 10. Click if you would like to Show Work for this question: Open Show Work By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.

Please answer B/C and B-C

Answer 1

1. upkeep cost initial cost = 3950őo 88.000oper year salvage value 63000 Interest = ;7% 90,000 person/year visit, and increase by 27 500 each year and additional $0.7 pervisit (P/A 17% 10) (1+i) ? =(1+0.07) "0_1 0.07 (1+00710 H+(1+i)" = 7.0236 h 10 - 0.508 (P/7, 79,10) (PG, 77,10) n City) - 1.0 (CHI (n W (1+i) - i (tilh (tin in = 1 0102 1-0710-1 10 0.07(1.077) 1-07 10 = 27. 216 present value of benefut 90000 x0.7 xCP/A, 7%-107 +27500X0.7 (P/G, 7%,10) = 90000 X0.7 X 7.0236 +27500X0.7 X 27.216 = 966394.8 present value of cost 305,000 + 8000 (P/A, 7%. -63000 (P/F 1720,10) 305,00 0 +8000 X 7.0236-63000 * 0.508 329184.8 Blca 2.936 966394.8/ 329184.8 = 966 394.8-329184.8 $637210 Benefit - cost

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