Reference no: EM132296154
Urban development planning application: The city of Asheville is faced with a severe budget shortage. Seeking a long-term solution, the city council votes to improve the tax base by condemning an inner-city housing area and replacing it with a modern development. The project involves two phases: (1) demolishing substandard houses to provide land for the new development and (2) building the new development. The following is a summary of the situation. 1. As many as 300 substandard houses can be demolished. Each house occupies a .25-acre lot. The cost of demolishing a condemned house is $2000. 2. Lot sizes for new single-, double-, triple-, and quadruple-family homes (units) are .18, .28, .4, and .5 acre, respectively. Streets, open space, and utility easements account for 15% of available acreage. 3. In the new development, the triple and quadruple units account for at least 25% of the total. Single units must be at least 20% of all units, and double units at least 10%. 4. The tax levied per unit for single, double, triple, and quadruple units is $1000, $1900, $2700, and $3400, respectively. 5. The construction cost per unit for single-, double-, triple-, and quadruple-family homes is $50,000, $70,000, $130,000, and $160,000, respectively. 6. Financing through a local bank is limited to $15 million.
b) Solve your model using Excel and Lingo and report your recommendation.
c) Do you find any problems with the final solution? Discuss your suggestion to fix the problem and then elaborate the limitations of your model and your suggestion.