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Practice Problem Midterm 2 2

# Practice Problem Midterm 2 2 - PPS 55 Spring 2003 Midterm...

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PPS 55 Spring 2003 Midterm II NOTE: please use just two decimal points in your computations for all the problems! PPS PIN _________________________ Section _________________________ 1

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1. Play away (40 pts) Durham is considering building a playground in Cornwallis Park just off Cornwallis road. There are 25 families in the Cornwallis neighborhood who each value a new playground at \$200 a year. In addition, the park is close enough to Chapel Hill that families come from there. They value the park at \$.5 a visit and combined they visit a total of 500 times a year. Other people in Durham, not in the Cornwallis neighborhood also come to the park. They value it at \$1 per visit and make about 1000 visits total a year. There is yet another group of people who do not have kids, but nevertheless like watching families in the park. They place a combined value of \$3000/year from watching kids play at the playground. There are two current choices for placement of the playground within the city park. One place is in a large open area. Another is on the side of a wooded area. Some residents in the local neighborhood value the open space and would not like to see it used for a playground. These people put a combined value of \$4000/year on the open land. As soon as construction starts on that land, they loose their enjoyment from it. The land near the wooded area is just part of the park and nobody minds a playground in that location. The playground is expected to cost \$33000 to build if it is built in the open area. Placing the playground near the wooded area would increase the cost of the playground by \$20,000. The cost of maintaining the playground is \$1000 year starting in year 1. The discount rate is 5%. The playground is expected to last 20 years. Kids will not be allowed on the playground until year 1.
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Practice Problem Midterm 2 2 - PPS 55 Spring 2003 Midterm...

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