Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 37

A very successful health and recreation club wants to construct a mock mountain for climbing and exercise outside for its customers' use. Because of its location, there is a 30% chance of a 120-day season of good outdoor weather, a 50% chance of a 150-day season, and a 20% chance of a 165-day season. The mountain will be used by an estimated 350 persons each day of the 4-month (120-day) season, but by only 100 per day for each extra day the season lasts. The feature will cost $375,000 to construct and require a $25,000 rework each 4 years; and the annual maintenance and insurance costs will be $56,000. The climbing fee will be $5 per person. If a life of 10 years is anticipated and a 12% per year return is expected, determine if the addition is economically justified.