Rehabilitation of the National Guard Armory: A Cost-Benefit Analysis
Create a cost-benefit analysis for the following project using the net present value methodology:
The National Guard armory in Massachusetts is rapidly approaching the end of its useful life and has to be replaced. According to information provided to the Department of Military Affairs, ongoing special maintenance would cost $275,000 a year. The cost of facility renovation would be $4,000,000, and it would increase the armory’s useful life by 15 years.
Determine the discount factor for each year using a 15-year discount period of 4%.
Determine the yearly present value (15 years) of the maintenance expense.
Determine the armory’s discounted benefit by restoring it.
What is the proposal’s cost-benefit ratio, given the reduced cost of rehabilitation?
When finishing your project review, be sure to add details about the following:
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the project’s aims
a classification of the project’s costs based on the project’s demand and consumer surplus
a forecast of possible delays