A relocation of a short stretch of rural highway feeding into Route 390 northwest of Dallas is to be made to accommodate new gro
wth. The existing road is now unsafe, and improving it is not an alternative. Alternate new route locations are designated as East and West. The initial investment by government highway agencies will be $3,650,000 for East and $5,000,000 for West. Annual highway maintenance costs will be $120,000 for East and $90,000 for the shorter location West. Relevant annual road user costs, to be treated as disbenefits, considering vehicle operation, time en route, fuel, safety, mileage, and so on, are estimated as $880,000 for East and only $660,000 for West. Assume a 20-year service life and i = 7% / year. Compute the incremental B/C ratio and decide whether East or West should be constructed.
1 answer:
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Answer:
$523,800
Explanation:
Given parameters:
Cost price by buyer = $525000
Selling price by seller = $485000
Sales tax = 8%
Unknown:
The lowest selling price by the seller = ?
Solution:
To solve this business problem, we must understand that the price the seller would be will to part with will be his selling price and the percentage of sales tax incurred in the procurement.
This will be the minimum and least profitable estimated amount the seller is willing to sell at.
Lowest selling price = selling price by seller + amount of sales tax incurred
Sales tax amount = selling price x sales tax percentage
= $485000 x
= $38800
Lowest selling price = $485000 + $38800 = $523,800