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Homework answers / question archive / You received your Master's in Public Administration degree from Nova Southeastern University and became a policy analyst with the City of Boondocks

You received your Master's in Public Administration degree from Nova Southeastern University and became a policy analyst with the City of Boondocks

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You received your Master's in Public Administration degree from Nova Southeastern University and became a policy analyst with the City of Boondocks. To enhance the recreational experience of citizens in your city, the city council wants to choose from the following four policy alternatives:

(1) Do Nothing

(2) Repair the Swimming Pool

(3) Build New Pool in a New Site

(4) Build New Pool on an Existing Site

Using the following data (Table1-4) for the four policy alternatives, calculate the NPV and BCR at a 5% discount rate and select the best policy alternative.  Upload the full excel sheet or ms word doc file with all steps and a brief explanation of what alternative is best and why.

Note: Y0-Y5 stands for Year0 to Year5

Alternative - Do Nothing

Table1:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 250,000

$ 250,000

$ 250,000

$ 250,000

$ 250,000

Benefits

 

0

$ 1,000,000

0

0

0

0

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 

Alternative - Repair the Swimming Pool

Table2:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 1057,000

$ 32,000

$ 32,000

$ 32,000

$ 32,000

Benefits

 

0

$ 165,000

$ 165,000

$ 165,000

$ 165,000

$ 165,000

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 

Alternative - Build New Pool at a New Site

Table3:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 1,080,000

$ 80,000

$ 80,000

$ 80,000

$ 80,000

Benefits

 

0

$ 365,000

$ 365,000

$ 365,000

$ 365,000

$ 365,000

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 

Alternative - Build New Pool at an Existing Site

Table4:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 1000,000

$ 55,000

$ 55,000

$ 55,000

$ 55,000

Benefits

 

0

$ 165,000

$ 165,000

$ 165,000

$ 165,000

$ 165,000

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 


 

You received your Master's in Public Administration degree from Nova Southeastern University and became a policy analyst with the City of Boondocks. To enhance the recreational experience of citizens in your city, the city council wants to choose from the following four policy alternatives:

(1) Do Nothing

(2) Repair the Swimming Pool

(3) Build New Pool in a New Site

(4) Build New Pool on an Existing Site

Using the following data (Table1-4) for the four policy alternatives, calculate the NPV and BCR at a 5% discount rate and select the best policy alternative.  Upload the full excel sheet or ms word doc file with all steps and a brief explanation of what alternative is best and why.

Note: Y0-Y5 stands for Year0 to Year5

Alternative - Do Nothing

Table1:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 250,000

$ 250,000

$ 250,000

$ 250,000

$ 250,000

Benefits

 

0

$ 1,000,000

0

0

0

0

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 

Alternative - Repair the Swimming Pool

Table2:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 1057,000

$ 32,000

$ 32,000

$ 32,000

$ 32,000

Benefits

 

0

$ 165,000

$ 165,000

$ 165,000

$ 165,000

$ 165,000

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 

Alternative - Build New Pool at a New Site

Table3:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 1,080,000

$ 80,000

$ 80,000

$ 80,000

$ 80,000

Benefits

 

0

$ 365,000

$ 365,000

$ 365,000

$ 365,000

$ 365,000

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

 

Alternative - Build New Pool at an Existing Site

Table4:

 

Y0

Y1

Y2

Y3

Y4

Y5

Costs

 

0

$ 1000,000

$ 55,000

$ 55,000

$ 55,000

$ 55,000

Benefits

 

0

$ 165,000

$ 165,000

$ 165,000

$ 165,000

$ 165,000

Discount Rate

 

5%

5%

5%

5%

5%

Discount Factor

 

.9524

.9070

.8638

.8227

.7835

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Step-by-step explanation

Alternative - Do Nothing            
Particulars Y0 Y1 Y2 Y3 Y4 Y5
Costs 0 250,000 250,000 250,000 250,000 250,000
Benefits 0 1,000,000 0 0 0 0
Discount Rate   5% 5% 5% 5% 5%
Discount Factor   0.9524 0.907 0.8638 0.8227 0.7835
Net Cash Flows 0 750,000 -250,000 -250,000 -250,000 -250,000
Present value of Cash Flows 0 714,300 -226,750 -215,950 -205,675 -195,875
Net Present Value -129,950          
Alternative - Repair the Swimming Pool            
Particulars Y0 Y1 Y2 Y3 Y4 Y5
Costs 0 1,057,000 32,000 32,000 32,000 32,000
Benefits 0 165,000 165,000 165,000 165,000 165,000
Discount Rate   5% 5% 5% 5% 5%
Discount Factor   0.9524 0.907 0.8638 0.8227 0.7835
Net Cash Flows 0 -892,000 133,000 133,000 133,000 133,000
Present value of Cash Flows 0 -849,541 120,631 114,885 109,419 104,206
Net Present Value -400,400          
Alternative - Build New Pool at a New Site            
Particulars Y0 Y1 Y2 Y3 Y4 Y5
Costs 0 1,080,000 80,000 80,000 80,000 80,000
Benefits 0 365,000 365,000 365,000 365,000 365,000
Discount Rate   5% 5% 5% 5% 5%
Discount Factor   0.9524 0.907 0.8638 0.8227 0.7835
Net Cash Flows 0 -715,000 285,000 285,000 285,000 285,000
Present value of Cash Flows 0 -680,966 258,495 246,183 234,469.5 223,297.5
Net Present Value 281,479          
Alternative - Build New Pool at an Existing Site          
Particulars Y0 Y1 Y2 Y3 Y4 Y5
Costs 0 1,000,000 55,000 55,000 55,000 55,000
Benefits 0 165,000 165,000 165,000 165,000 165,000
Discount Rate   5% 5% 5% 5% 5%
Discount Factor   0.9524 0.907 0.8638 0.8227 0.7835
Net Cash Flows 0 -835,000 110,000 110,000 110,000 110,000
Present value of Cash Flows 0 -795,254 99,770 95,018 90,497 86,185
Net Present Value -423,784          

 

Considering the four alternative, the only viable alternative, and the one that should be selected is Alternative 3 - Build a New Pool at a New Site. This is because this project has a positive NPV, meaning that it shall contribute positively to shareholder wealth in present value terms if considered, whereas all the other alternatives cause a deterioration in shareholder wealth in present value terms.