US Airways (American Airlines) owns a piece of land near the Pittsburgh International Airport. The land originally cost US Airways (American Airlines) $375,000. The airline is considering building a new training center on this land. US Airways (American Airlines) determined that the proposal to build the new training center is acceptable if the original cost of the land is used in the analysis, but the proposal does not meet the airline’s project acceptance criteria if the original land cost and cost to build exceeds the total economic profit. Assume the deciding owner-managers (4) where paid $15,000 each to visit the site and speak with the developer, assume the labor and raw materials total $12,720,000 and that American Airlines had a totatl revenue in 2019 of $213 million for profit-sharing. A developer recently offered US Airways (American Airlines) $2.5 million for the land. What is the economic profit, opportunity cost, and should US Airways (American Airlines) build the training center at this location or accept the developers offer? (Chapter 8 Economic Cost)
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