40. Cornell has two options for upgrading their athletic facilities. The off campus option costs only $2.5 million, but it will require frequent bus service to those facilities at an annual cost that starts at $200,000 and increases by 5% per year (buses, drivers and mechanics salaries, maintenance, road wear, etc) Improving the on-campus facilities will cost $5.0 million, but no extra transportation costs are required. Both options involve an estimated annual
maintenance cost of 1 million for about 30 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 10% per year Contributed by D P Loucks Cornell University