Corporation is considering two locations for water park

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Reference no: EM131861321

The Wisconsin Trip Corporation is considering two locations for a water park.

The Racine location would require an investment of $3 million, and $40,000 per year to maintain, and will generate $450,000 in revenue per year.

The Lake Geneva location would cost $7 million to construct, and $60,000 per year to maintain, but would generate $750,000 in revenue per year.

Assume that either water park will be maintained and operated indefinitely. Use an interest rate of 12% per year to determine which location, if either, should be selected on the basis of:

(a) The B/C method; and

(b) The modified B/C method (with maintenance costs subtracted from the benefits, instead of added to the costs).

Reference no: EM131861321

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