Problem
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. Contributed by D. P. Loucks, Cornell University.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.