Posted by Thano on Monday, July 23, 2007 at 3:35am.
The Only Organic (OO) golf complex has a first cost of $55M, annual O&M costs of $10M, salvage value in year 100 of $25M, clubhouse renovation every 10 years costing $19M (but not in year 100), and reseeding every 4 years starting in year 4 costing $8M. Additional miscellaneous work will be done every 5 years starting in year 5 costing $2M (but not in year 100), and other annual costs of $1M. Find the EAC for a 100-year horizon if i = 10%. Roughly 500 golfers are expected to use the golf complex daily. What is the benefit (or cost) per daily golfer to justify the golf complex?
I am uncertain what you question is. The problem is straightforward: Ammoritize the cost over a 100 year term. The only question I had on the problem is whether the costs (OM, renovation, and misc work) are given in present value or future value. In my experience, it would be present value, but the question does not seem written that way. We can check your work if you need.
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