The B/C method, and (b) The modified B/C method to determine which location, if either, should be selected, using an interest rate of 12% per year. Assume that the park will be maintained indefinitely.
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The California Forest Service is considering two locations for a new state park. Location E
would require an investment of $3 million and $50,000 per year in maintenance. Location W
would cost $7 million to construct, but the Forest Service would receive an additional $25,000
per year in park use fees. The operating cost of location W will be $65,000 per year. The revenue
to park concessionaires will be $500,000 per year at location E and $700,000 per year at location
W. The disbenefits associated with each location are $30,000 per year for location E and $40,000
per year for location W. Use
(a) The B/C method, and
(b) The modified B/C method to determine which location, if either, should be selected, using an
interest rate of 12% per year. Assume that the park will be maintained indefinitely.
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