​​​ The Defence Department has the difficult decision of deciding which military bases to shut down. Military and political factors obviously matter, but cost savings are also an important factor. There are two naval bases located in New South Wales – one in Nowra and the other in Balmoral. Based on the military and political considerations the Navy has decided that it needs only one of those two bases permanently, so one must be shut down. The decision regarding which base to shut down will be made on cost considerations alone. The following information is available. 1. The Nowra base was built at a cost of $100 million. The operating costs of the base are $400 million per year. The base is built on land owned by the Navy, so the Navy pays nothing for the use of the property. If the base is closed the land will be sold to developers for $500 million. 2. The Balmoral base was built at a cost of $150 million on land leased by the Navy from private citizens. The Navy can choose to lease the land permanently for a lease payment of $3million per year. If it decides to keep Balmoral base open, the Navy plans to invest $60 million in a fixed income note, which at 5% interest per annum will earn the $3million per year the government needs for lease payments. The land and buildings will immediately revert back to the owner if the base is closed. The operating costs of the base excluding the lease payments are $300 million per year. 3. If the Nowra base is shut down the Navy will have to transfer some personnel to the Balmoral facility. As a result the yearly operating costs of Balmoral will increase by $100million per year. If the Balmoral facility is closed down, no extra costs will be incurred to operate the Nowra facility. Requirements: A. List all the costs and revenues given in numerical values above. For each item you listed, state whether the cost or the revenue is a "relevant" information or not in relation to making the decision of which naval base to close down. For each cost or revenue explain why you considered the particular information relevant or not relevant. (64 marks) B. Analyse all the relevant information you identified under requirement (A) above and decide which naval base should be closed down based only on cost considerations. What is the net benefit to the Navy if it accepts the decision you are recommending? (16 marks) C. Write a report to the Director of the Defence Department (not exceeding half a page) recommending your decision and explaining how you arrived at the decision based on your answers to requirements A and B above.(20 marks)