Suppose that the City of Chattanooga's Parks and Outdoors has decided to compare two mutually exclusive alternative proposals for a new soccer complex on a city owned lot and jotted down the following preliminary information.
Alternative design 1 has seating capacity of 3,000; annual benefits= $194,000, annual costs = $87,500, and the required investment is $800,000.
Alternative design 2 has seating capacity of 4,000; annual benefits = $224,000, annual costs = $105,000, and the required investment is $1,000,000.
Each alternative is expected to be used for 30 years but has no appreciable salvage value. The administrator of the City's Parks and Outdoors wants your suggestion to decide the best alternative based on 8% discount rate. They also want you to present your findings.
Hint: This is a Benefit - Cost Analysis problem.