Capital Budgeting Mini$-$Case Assignment Instructions

You are the newest member of a non$-$profit college's Capital Budgeting Committee. The

committee is charged with allocating funding for all capital projects during the annual budget

process. This year the Board of Trustees has allocated $$15$ million dollars for capital projects.

The college has $$2$ million of its own funds at a cost of $3\mathrm{.}23\%$ and will have to issue a bond for

the remaining expenditures related to the projects. The projected $30-$year bond rate is $5\mathrm{.}07\%.$

You are an alumnus of the college. While in college, you played lacrosse and have maintained a

close relationship with several teammates and the current coach. You also have a daughter who

will be attending the college in the fall. She will be enrolling in the Physical Therapy Program.

While serving on the Board of Trustees you have developed relationships with many faculty and

administrators.

Three areas of the college have submitted requests:

Residential Life

The college currently has $6$ dormitories with $200$ students housed in each dorm. Recently, there

has been a shortage of on$-$campus housing. As a result, many students have moved off

campus. Additionally, on$-$campus students have been complaining about the poor quality of the

bathrooms and dorms in general. The dining commons is also outdated by today's standards.

The food service is outsourced to Aramark. Aramark has indicated the company is willing to

contribute $$1\mathrm{.}0$ million towards the renovation as they project more students and faculty will

utilize the dining services. Currently the college receives $20\%$ of all revenue generated by food

service.

New Dormitory $-$ estimated cost $$8$ million, will increase current on$-$campus housing of $1200$

students by $15\%.$ The dorm is expected to have a useful life of $30$ years. Annual housing fees

per student are $$10,000.$ The new dorm will not be completed for $2$ years. The college will need

to expend $$5$ million the first year and will pay for the remainder of the project in year $2.$Athletics

Athletics is a vital part of the campus community. Several of the coaches have voiced concerns

that recruiting has become increasingly difficult due to the quality of the current facilities. Many

recruits are opting to attend other colleges with better facilities.

New Lacrosse Turf Field $-$ estimated cost $$750,000.$ The lacrosse team will now be able to

host summercamps, which will generate approximately $$100,000$ each summer.

New Buses $-$ estimated cost $$500,000$ each. The two new buses will eliminate the need to

charter buses for the teams. Currently the college spends approximately $$60,000$ annually on

travel fees for the teams. The estimated annual cost to maintain these new buses is $$35,000$

annually.

Wellness Center $-$ estimated cost $$20,000,000.$ The facility will be used by current students,

alumni and community members. Alumni will be charged an annual fee of $$100.$ It is estimated

that $400$ local alumni will utilize the facility. An estimated $200$ community members will be

charged $$200$ annually. The Development Department estimates that donations by alumni who

were athletes will increase by $$200,000$ a year. The college will also solicit naming rights for

$$5,000,000.$ Admissions believe the new wellness center will have the potential to increase

enrollment by $50$ students. The project will take $3$ years to complete. Payments will be spread

out of the life of the project.

New Vans $-$ estimated cost $$150,000.$ The vans will be used to drive smaller teams such as

tennis to matches. This will save on use of a bus. Estimated annual savings is $$3,000$

Academic Affairs

As with other areas on campus a number of academic facilities are outdated. It is difficult for

professors to effectively teach with the current equipment and facilities. The current classroom

setup allows little ability for collaboration and teamwork. Each classroom is equipped with a

computer, however most are outdated and unable to be updated. Additionally, the health

labs and general facilities. Faculty heve been less competitive due to their outdated simulation

have indicated that they are unable to work with extremely unhappy with their office space$\backslash$