Question

Temple University is considering a new Football stadium. It will cost $49000000. They anticipate that it will also cost $5486000 per year to maintain. They will build it as soon as they have enough donations to cover the cost of building and maintaining it indefinitely.

a. Assuming a MARR of 4.4% per year, and using the Capitalized Worth Method find the amount of donations they must collect?
The University is also considering building a parking lot. It will cost $1163000. The revenue from parking will cover the expenses, but it will have to be completely replaced every 10 years at an equal cost.

b. Using the same MARR as above and the CW method calculate the amount of money they must raise to keep the parking lot indefinitely.

Answer 1

Football stadium will cost initially $49000000 and $5486000 per year to maintain it indefinitely.

a. Assuming a MARR of 4.4% per year, and using the Capitalized Worth Method find the amount of donations they must collect?

The current (present) amount of the donations = capitalized equivalent of the stadium = 49000000 + 5486000/0.044 = 173,681,818

The University is also considering building a parking lot. It will cost $1163000. The revenue from parking will cover the expenses, but it will have to be completely replaced every 10 years at an equal cost.

b. Using the same MARR as above and the CW method calculate the amount of money they must raise to keep the parking lot indefinitely.

The amount of money they must raise to keep the parking lot indefinitely = $1,163,000(A/F, 4.4%, 10)/4.4% = $1163000*0.0817582/0.044

= $2,161,018