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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

Business Dec 30, 2022

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

(1) Do Nothing

(2) Repair the Swimming Pool

(3) Build New Pool in a New Site

(4) Build New Pool on an Existing Site

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

Expert Solution

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.

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