Cornell has two options for upgrading its athletic facilities. The off-campus option costs only $20 million, but
Question:
Cornell has two options for upgrading its athletic facilities. The off-campus option costs only $20 million, but it will require frequent bus service to those facilities at an annual cost that starts at $300,000 and increases by 4% per year. (Buses, drivers, and mechanics, salaries, maintenance, road wear, etc). Improving the on-campus facilities will cost $50 million, but no extra transportation costs are required. Both options involve an estimated annual maintenance cost of $1 million for about 40 years before new facilities will again be needed. Using benefit-cost ratio analysis, determine which option is more economically efficient. Use an interest rate of 8% per year.
Organizational Behavior Managing People and Organizations
ISBN: 978-1305501393
12th edition
Authors: Ricky W. Griffin, Jean M. Phillips, Stanley M. Gully