Question: The city of Columbia is considering extending the runways of its municipal airport so that commercial jests can use the facility. The land needed for the runway extension is currently farmland, which can be purchase for $350,000. Construction costs for the runway extensions are projected to be $600,000, and the added annual maintenance cost for the extensions are estimated to be $22,500. If the runways are extended, a small terminal will be constructed at a cost of $250,000. The annual operating and maintenance costs for the terminal are estimated $25,000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of $100,000.

Annual benefits of the runway extensions have been estimated as follows:

? $325,000: Rental receipts from airlines leasing space at the facility

? $65,000: Air tax charged to passengers

? $50,000: Convenience benefit for residents of Columbia

? $50,000: Additional tourism dollars for Columbia

Additionally, the increased noise level from commercial jet practice will be a serious nuisance. The annual dis-benefit to citizens of Columbia caused by this noise pollution is estimated at $100,000.

It the study period is 20years and the MARR is 10%, should the city of Columbia extend the runways?