Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 8, Problem 8E
To determine
Whether A build the maintenance facility or not.
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US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost USAirways $375,000. The airline is considering building a new training center on this land. US Airwaysdetermined that the proposal the new facility is acceptable if the original cost of the land is used in theanalysis, but the proposal does not meet the airline’s project acceptance criteria if the land cost is above$850,000. A developer recently offered US Airways $2.5 million for the land.Explain fully if US Airways should build the training facility at this location or not.
My answer is yes. Can you please suggest better ideas? Thank you!
The ARA Railroad owns a piece of land along one of its right-of-ways. The land originally cost ARA $100,000. ARA is considering building a new maintenance facility on this land. ARA determined that the proposal to build the new facility is acceptable if the original cost of the land is used in the analysis, but the proposal does not meet the railroad’s project acceptance criteria if the land cost is above $500,000. An investor has recently offered ARA $1 million for the land. Should ARA build the maintenance facility at this location? Why or why not?
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Chapter 8 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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