1. Cost Benefit Analysis of Purchasing a Newly Constructed Suburban Home vs. Urban Fixer-Upper Team 4 Members: Scott Tatman (Team Leader) Carmen Ivanescu (Organizer) David Sacilotto (Organizer) Veronica Holliday (Organizer) Bo Xu (Organizer)

2. Scenario Family of four – Parents and 2 kids Family of four – Parents and 2 kids Both kids are entering high school Both kids are entering high school Family comparing two different purchase options for a home Family comparing two different purchase options for a home What are the associated costs? What are the associated costs? Which option will yield a greater benefit after five years when the kids are in college? Which option will yield a greater benefit after five years when the kids are in college? What are some of the intangible benefits of either option? What are some of the intangible benefits of either option?

3. Option 1 – Urban Fixer-Upper Locations are Los Angeles area. Locations are Los Angeles area. Older 1910-1940 houses. Older 1910-1940 houses. Home Loan Information Home Loan Information –$450,000 Home Cost –20% Down –30 year loan –6% Mortgage rate Needs major house improvements. Needs major house improvements. –Labor/Construction costs. –Materials. –Building Permits. Intangible Benefits Intangible Benefits –Employment opportunities. –Entertainment/recreation. –Sense of community. –Crime/Safety Statistics. –School District.

4. Option 2 – Newly Constructed Suburban Home Locations are Walnut, Diamond Bar, Chino Hills areas. Locations are Walnut, Diamond Bar, Chino Hills areas. Newly constructed 1990-2004 houses. Newly constructed 1990-2004 houses. Home Loan Information Home Loan Information –$450,000 Home Cost –20% Down –30 year loan –6% Mortgage Rate Invests money that would otherwise be spent on repairs Invests money that would otherwise be spent on repairs Secondary Costs Secondary Costs –Backyard and Garden costs. Intangible Benefits Intangible Benefits –Employment opportunities. –Entertainment/recreation. –Sense of community. –Crime/Safety Statistics. –School District.

5. Resources Internet Sites Internet Sites –Mortgage Info –Average home appreciation for areas under consideration –Average rates of return for various investment options –Average repair costs and rates of return for home improvements “Essentials of Engineering Economic Analysis Second Edition,” by Newnan, Lavelle, and Eschenbach “Essentials of Engineering Economic Analysis Second Edition,” by Newnan, Lavelle, and Eschenbach –All formulas and functions for analysis