CBA Worksheet TASK 2You are required to perform a project appraisal for a new football stadium....

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CBA Worksheet TASK 2You are required to perform a project appraisal for a new football stadium. There are two possible options for the new stadium. Option 1 is a smaller stadium, with low costs and option 2 requires a greater investment but provides several additional facilities and holds larger crowds, and allows higher ticket prices to be charged. Therecommended discount rate is 3%.Details of option 1 are presented below.Task 1One-off costsThe site will be purchased at $1.1m. The cost of planning is estimated at $50,000. Both the purchase of the land and the planning agreement must be in place before construction of the new stadium can begin. Construction is estimated to take one year. Construction costs estimated by the contractor, which occur in year 0, include site clearance and preparation estimated at around $1.2m.The prefabricated elements of the stands cost $2m, plant rental costs $40,000 per month (required for all 12 months). Wages for 80 workers cost $12 per hour, and a site manager costs $22 per hour. Estimated staffing times are 40 hours per week all year (47 weeks) for the site manager, and 38 hours per week for 80 workers all year (47 weeks). The stadium will require around 10 new employees, who will perform a range of jobs (including refreshments serving, cleaning, etc.). There is an associated one‐off human resource cost associated with the advertising, interviewing, and training of these staff which is estimated at $22,000. This cost will also occur in year 0.Ongoing costsOngoing costs need to be considered for the 20 years period, starting in year 1. Ongoing costs are as follows:Staff wages of 25 employees with an annual salary of $16000 each. The growth rate for all staff wages is 1.5%. Staff begins working in year 1.Maintenance cost is $150000 per annum, incurred from year 1 onwards, and will grow at a rate of 4% per annum.BenefitsThe stadium holds 15,000 fans, tickets priced at $10 per match. There are 23 home matches per annum. Benefits begin in year 1 and grow at a rate of 4% per annum.EXERCISEData Summary Table. Construct an excel spread-sheet containing relevantinformation given above to perform a Cost Benefit Analysis.Calculations of NPV and BCR.Construct the costs and benefits that include the 20 year time period.Using the data on costs and benefits calculate the NPV and BCR associated with option 1 given a CBA period of twenty years. Assume that all benefitsare realized in the middle of each year. Assume that all other impacts arerealised at the end of each year.Sensitivity Analysis.Construct a sensitivity table relating to changes in ticket sales.Use a range of $500,000 to $3,500,000 with increments of $500, 000.Task 2Option 2 requires a much greater investment but provides a much bigger stadium capable of holding larger crowds and provides several additional facilities which will allow for a higher ticket price to be charged. The recommended discount rate is 3%. Details of option 2 are presented below.One-off costsOption 2 involves building a larger stadium with associated greater costs. The larger stadium will hold some 20,000 fans. All costs occur in year 0. The costs are as follows:Site purchase = $1.1mPlanning process = $50,000Site clearance and preparation (including foundations) = $2.75mPrefabrication elements of the stands = $4.8mPlant rental costs $60,000 per month (required for all 12 months)Estimated wages of 100 workers at cost $8 per hour, 38 hours per week for 47 weeks.Wages for site manager at $22 per hour, 40 hours per week for 47 weeks.Human resources cost for 15 new employees is estimated at $32,000Ongoing costsThe ongoing costs are the same as the smaller stadium but are more expensive due to the size of the Option 2 stadium. These costs should be considered for the whole 20 year period, starting in year 1. Ongoing costs are as follows:Wages for 30 employees at $14000 each per annum. The growth rate of staff wages = 1.5%The maintenance cost is estimated at $250,000 per annum. Growth rate at 4% as stadium ages.BenefitsThe benefits of the stadium remain the same as option 1. However, the extra facilities at the stadium mean a larger charge to 20,000 fans of $15 per game.EXERCISEData Summary Table.Construct an excel spread-sheet containing relevantinformation given in Option 2 to perform a Cost Benefit Analysis.Calculations of NPV and BCR.Using the data on costs and benefits provided foroption 2 what is the NPV and BCR associated with option 2 given a CBA period of twenty years? Assume that all benefits are realized in the middle of each year. Assume that all other impacts are realised at the end of each year.Sensitivity Analysis. List four items that should be included in the sensitivity analysis. Explain why these items should be included in the sensitivity analysis.

Neha · Accepted Answer

Cover sheet
	Cover Sheet
	Student name:
	Student number:
	Acknowledgments:
	This task has been developed to improve your understanding of the technical aspects of a Cost Benefit Analysis. The skills developed will be useful when performing other assessment items such as the CBA Group Report and the final exam. Use the EXCEL spreadsheet template provided to complete the tasks.
1. Summary Table (Option 1)
		SUMMARY TABLE: OPTION 1 
				Notes
	It is the variation that can be eperienced by the changes in one or more aspect of internal or extenal sources affecting the business either directly or indirectly. It tells model user how dependent the output value is on each input.
Items to be used:-
1. Capital Expenditure
2. Operational Expenditure
3. Production
4. Market prices
Reason:-
Caital expenditures can affect the sorces and funding power of the business. IT affects the cash flows.
Operations can take away the profits or can increase the supply.
Production if done in right number can be beneficial else can result in in hand surplus inventory.
MArket prices influences the prices of raw material and selling price affecting profits and losses.	ONE OFF COSTS		(insert notes below)
		Name of cost item	Monetary value
	Production	(insert items below)	(insert dollar value below)
		Site Purchase	$   1,100,000.00
	50%	-2000	$   50,000.00
	60%	-570	$   1,200,000.00
	70%	1269	$   2,000,000.00
	80%	3000	$   480,000.00
	90%	4800	$   22,000.00
	100%	6600	$   - 0
	110%	8000	$   - 0
	120%	10025	$   - 0
		TOTAL	$   4,852,000.00
		ON GOING COSTS
		Staff wages	$   400,000.00
		Wage growth rate 	1.50%
		Maintenance 	$   150,000.00
		Maintenance growth rate	4%
		BENEFITS
		Ticket sales	$   3,450,000.00
		Growth rate	4%
		Discount rate	$   0.03
				3%
			ERROR:#DIV/0!
			3%
2. Cost, Benefits, NPV & BC 
		OPTION 1: Costs, benefits, NPV & BCR
	It is the variation that can be eperienced by the changes in one or more aspect of internal or extenal sources affecting the business either directly or indirectly. It tells model user how dependent the output value is on each input.
Items to be used:-
1. Capital Expenditure
2. Operational Expenditure
3. Production
4. Market prices
Reason:-
Caital expenditures can affect the sorces and funding power of the business. IT affects the cash flows.
Operations can take away the profits or can increase the supply.
Production if done in right number can be beneficial else can result in in hand surplus inventory.
MArket prices influences the prices of raw material and selling price affecting profits and losses.				MULTIPLE YEAR COSTS
					0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20
	Production	COSTS	Monetary value (staff wages) 	$		$   400,000.00	$   406,000.00	$   412,090.00	$   418,271.35	$   424,545.42	$   430,913.60	$   437,377.31	$   443,937.97	$   450,597.03	$   457,355.99	$   464,216.33	$   471,179.57	$   478,247.27	$   485,420.98	$   492,702.29	$   500,092.83	$   507,594.22	$   515,208.13	$   522,936.25	$   530,780.30
			Growth rate(i.e. inflation rate) 	%		1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%	1.5%
	50%		lag factor
	60%		compound value 	$		$   400,000.00	$   806,000.00	$   1,218,090.00	$   1,636,361.35	$   2,060,906.77	$   2,491,820.37	$   2,929,197.68	$   3,373,135.64	$   3,823,732.68	$   4,281,088.67	$   4,745,305.00	$   5,216,484.57	$   5,694,731.84	$   6,180,152.82	$   6,672,855.11	$   7,172,947.94	$   7,680,542.16	$   8,195,750.29	$   8,718,686.54	$   9,249,466.84
	70%		discount rate	%		0.971	0.943	0.915	0.888	0.863	0.837	0.813	0.789	0.766	0.744	0.722	0.701	0.681	0.661	0.642	0.623	0.605	0.587	0.57	0.554
	80%		PV (costs) 	$		$   388,400.00	$   382,858.00	$   377,062.35	$   371,424.96	$   366,382.70	$   360,674.68	$   355,587.75	$   350,267.05	$   345,157.33	$   340,272.86	$   335,164.19	$   330,296.88	$   325,686.39	$   320,863.27	$   316,314.87	$   311,557.83	$   316,231.20	$   311,700.92	$   306,963.58	$   302,544.77	$   6,815,411.58	Total PV (Staff Cost)
	90%		Monetary value (maintenance cost)	$		$   150,000.00	$   156,000.00	$   162,240.00	$   168,729.60	$   175,478.78	$   182,497.94	$   189,797.85	$   197,389.77	$   205,285.36	$   213,496.77	$   222,036.64	$   230,918.11	$   240,154.83	$   249,761.03	$   259,751.47	$   270,141.53	$   280,947.19	$   292,185.07	$   303,872.48	$   316,027.38
	100%		Growth rate(i.e. inflation rate)	%		4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%	4%
	110%		lag factor
	120%		compound value	$		$   150,000.00	$   306,000.00	$   468,240.00	$   636,969.60	$   812,448.38	$   994,946.32	$   1,184,744.17	$   1,382,133.94	$   1,587,419.30	$   1,800,916.07	$   2,022,952.71	$   2,253,870.82	$   2,494,025.65	$   2,743,786.68	$   3,003,538.15	$   3,273,679.67	$   3,554,626.86	$   3,846,811.93	$   4,150,684.41	$   4,466,711.

CBA Worksheet TASK 2 You are required to perform a project appraisal for a new football stadium. There are two possible options for the new stadium. Option 1 is a smaller stadium, with low costs and...

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