PLEASE HELP!!! Scenario: The City of Ocelot has received three proposals for the

Question

PLEASE HELP!!! Scenario: The City of Ocelot has received three proposals for the development of currently vacant land near a freeway exit and about a mile from the nearest residential neighborhood. One is the proposal for a night club by the Funtime Corporation, another is the construction of a private health club, and the third is for the construction of a gated condominium complex. Your advice has been requested in considering these proposals. The City of Ocelot was established several years ago and has grown rapidly to a population of 40,000 with a range of incomes from very wealthy to about 10% below the poverty level. Housing ranges from high-end houses and condominiums to publicly subsidized apartments. The ethnic distribution of the population is 60% Anglo-American, 20% Hispanic-American, 12% African-American, 5% Asian-American, and 3% Native American. Ocelot is located on an Interstate Highway about 30 miles from a major city. 1. Discuss how Cost-Benefit Analysis (CBA) can contribute to the decision regarding the proposed projects. What considerations will be illuminated by CBA, and which will be obscured or overlooked? Considering both its strengths and weaknesses, what role should CBA have in the decision-making process? Should the findings of the CBA be the deciding factor, should it be one of a number of factors considered, or should the CBA have little impact upon the final decision? 2. Choose the project (Funtime club, health club, or condos) you believe the most advisable for the City of Ocelot to pursue, and describe the process for adoption and implementation. Discuss matters that may complicate the implementation process for the option your recommend.

Explanation / Answer

1. Cost benefit analysis can be used as a process to analyze the three different options. The benefits from all the three poposals will have to be determined. The cost of each proposal will have to be subtracted from their respective benefits. The proposal with the highest amount (present value of benefits - present value of costs) should ideally be pursued. The cost benefit analysis will help in determining the financial feasibility of each proposal and the proposal with the highest feasibilty will be selected.

CBA will clearly illuminate the tangible benefits and costs of each proposal. However, intangible considerations are usually overlooked by the CBA analysis. When determining the net value (benefits - costs) intangible factors like the needs and wants of people are ignored. Even if the intangibles are not ignored, it becomes difficult to objectively evaluate the intangible costs and intangible benefits.

Clearly, CBA analysis is a quantitative assessment tool and there is some element of subjectivity involved, specially regarding intangible costs and benefits. Thus, keeping in mind the strengths and weaknesses, CBA should have an impact on the decision making process, but it should not be the sole criteria when deciding on a proposal. Several qualitative factors should also be analysed and that too on an objective basis. Thus, CBA should be one of the factors that are being considered.

2. To select a proposal, we will have to look at the conditions and factors at City of Ocelot . 10% of the city's population lives below the poverty level. The balance 90% consists of lower middle class, upper middle class and very wealthy people. In terms of population distribution, the majority consists of anglo american.

My suggestion is that a night club will be the best proposal to pursue. This is because, the city already has houses ranging from high-end houses and condominiums to publicly subsidized apartments. Facilities of a health club will be present in most of the high end houses and condominiums. So, starting a health club will not be a good proposal. The city already has high-end houses and condominiums. So, starting a  gated condominium complex is also not a good idea. However, there is no mention of the city having a night club (and i am assuming the same). The night club can satisfy the need for entertainment for the 90% of the city's population.

The matters that may complicate the implementation process for the night club may be a certain level of inaccuracy while identifying and determining the costs and benefits.

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