Upgrading their athletic facilities

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Reference no: EM13928807

UMD 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 increase by 4% per year. (Buses, drivers and mechanics salaries, maintenance, and 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 10% per year.

Reference no: EM13928807

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