Engineering Economy at Trust for Public Land - Case Study Example

Engineering Economy 1. In order to understand the money required to support the project for the remaining two years one must first analyze all the costs associated with the project. (Blank and Tarquin 53) In the first two years, the annual amount that should be raised is the interests earned from TPL reserves, loan repayment, and the interest earned on the bonds issued by the government. Total Amount required to purchase the land = P (1+i) n P = 4,000,000 n = 5 years I = 25% Total amount after 5 years = 4,000,000 (1+ 0.25)5 = 12,207,031.25 The total cost of land is $ 12,207,031.25 Total Construction cost in 3 years = 550,000 + 650,000 + 750,000 = $1,950,000 Interest paid to TPL Reserves in two years = 1,000,000 x (0.07x2) = 140,000 Total Amount paid in two years = $1,140,000 Total Amount paid to the bonds in two years = 3,000000 + (3,000,000 x (0.07 x2) = $3,420,000 The Total Cost of the project = 12,202,031.25 + 1,140,000 + 3,420,000 = $16,272,031.25 The amount paid already = $4,000,000 Remaining amount = 16,272,031.25 – 4,000,000 = $12,272,031.25 They should raise 12,272.031.25/2 = $6,131,015.625 The project financier should raise $6,131,015.625 each year to be able to raise the total amount of needed funds within the two years. 2. The cost of the amount paid towards the land from year one to year four: Amount paid in four years = 4,000,000 (1 +0.25) 4 = $9,765,625 Deduct 3 million dollars from bonds = 9,765,625 – 3,000,000 TPL pays $6,765,625 to cover project cost until the fourth year. The amount to be raised to cover all project funds in two years includes construction cost, remaining amount to finish land payment, bond costs and TPL loan. Construction Cost = $1,950,000 Remaining land cost = $2,441,406.25 Amount to bond = 3000000(1 + (0.007x6) = $3,126,000 Amount payable to TPL = $6,765,625 (1+ (0.007 x 6) = $7,049,781.25 The Total Amount to be raised from years 4 through six: = 1950000 + 2441405.25 +3126, 000 +7049781.25 = $14,567,187.50 The project should raise $7,283,593.75 every year from year four to six. The amount will be sufficient to cover all the remaining project funds Factors to Consider The Trust for Public Land organization is in the business of creating parks and protect land for the benefit of the community (Trust for Public Land). The aim is to ensure healthy communities for many years. TPL is on a mission to protect land and create parks near homes. It gives everyone one a chance to interact with the beauty of nature. TPL is trying to prevent the utilization of land for real estate only. The organization gives priority to areas that are strategic because their destruction can lead to serious repercussions like loss of water source or the lack of place for people to interact with Mother Nature. Parks play a significant role in any community. They are places where families and lovers find an opportunity to bond. It is apparent that parks have values that extend beyond economic principles. They aid in nurturing relationships and the development of children. In addition to acting as recreation centers, parks possess significant aesthetic value. They add to environmental beauty, which has a significant impact on the image of a city. Trust for Public Land must consider the aesthetic value of the parks. The park would add value to the city by improving its beauty. They should consider the sentimental value of the part for many generations. The use of the park for resting and interacting with nature has a positive impact on the society. A recreational center provides children with a place to play and have fun. Play and fund play a significant role in child development. In conclusion, TPL must consider the aesthetic value of land, location, and its importance in a community. A consideration of these factors will help in determining whether it is worth saving or not. In this case, TPL must consider the role the land as a source of water. TPL should also consider a number of economic factors like the cost of protecting the land as opposed to using it for real estate. Essential economic factors that should be reviewed by TPL are total cost of the land, cost of developing the land, availability of funds and location. The availability of money or sponsors is an essential consideration when TPL is considering to save a given land. The nature of some lands might cost too much to develop. The organization should find out if the local government of an area is willing to provide support if TPL decides to save it. The other factors are interest rates and projected inflation trends. Works Cited Blank, Leland and Anthony Tarquin. Engineering Economy. New York: Mc-Graw-Hill, 2012. Print. Trust for Public Land. Overview: Trust for Public Land. n.d. Web. 9 March 2015. Read More