Owing to perennial complaints about the lack of parking on campus, Wayne State is considering building a new parking structure. The structure will have to pay for itself from parking fees over a 15-year period. Given the data below, determine whether the new parking structure should be constructed at all, and if so, how many levels it should have. Use benefit-cost ratio analysis, and assume an interest rate of 6% per year.
|
Number of Levels
|
1
|
2
|
3
|
4
|
|
Initial Construction Costs
|
$750,000
|
1,800,000
|
3,000,000
|
3,800,000
|
|
Annual Operating Costs
|
$45,000
|
65,000
|
80,000
|
90,000
|
|
Annual Income
|
$120,000
|
290,000
|
375,000
|
550,000
|