Determine which option is more economically efficient

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Question: Cornell has two options for upgrading their 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.

Reference no: EM132162942

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