Question 1
Q1A city council is debating a proposal to convert a vacant downtown lot into a multi-use skatepark. An urban planning consultant presents the following data table comparing the projected costs and benefits over a 5-year period.
| Metric | Projected Value | Margin of Error |
|---|---|---|
| Initial Construction Cost | $250,000 | +/- $20,000 |
| Annual Maintenance | $15,000 | +/- $3,000 |
| Annual Vandalism Repair | $8,000 | +/- $5,000 |
| Projected Annual Revenue | $5,000 | +/- $1,500 |
| Increase in Local Sales | 2% per year | +/- 0.5% |
To calculate the worst-case net financial outcome for the city over 5 years, which calculation should be performed?
Show answer & explanation
Correct answer: B
The worst-case scenario involves maximizing all costs and minimizing all revenue. This means adding the margin of error to construction, maintenance, and vandalism costs, and subtracting the margin of error from the projected revenue. The annual costs and revenues are then multiplied by 5 for the five-year period.