A local education authority is faced with a predicted decline in the demand for school places in its area. It is believed that some schools will have to close in order to remove up to 800 places from current capacity levels. The schools that may face closure are referenced as A, B, C and D. Their details are as follows:
● School A (capacity 200) was built 15 years ago at a cost of £1.2 million. It is situated in a ‘socially disadvantaged’ community area. The authority has been offered £14 million for the site by a property developer.
● School B (capacity 500) was built 20 years ago and cost £1 million. It was renovated only two years ago at a cost of £3 million to improve its facilities. An offer of £8 million has been made for the site by a business planning a shopping complex in this affluent part of the area.
● School C (capacity 600) cost £5 million to build five years ago. The land for this school is rented from a local business for an annual cost of £300,000. The land rented for School C is based on a 100-year lease. If the school closes, the property reverts immediately to the owner. If School C is not closed, it will require a £3 million investment to improve safety at the school.
● School D (800 capacity) cost £7 million to build eight years ago; last year £1.5 million was spent on an extension. It has a considerable amount of grounds, which is currently used for sporting events. This factor makes it attractive to developers, who have recently offered £9 million for the site. If School D is closed, it will be necessary to pay £1.8 million to adapt facilities at other schools to accommodate the change.
In its accounting system, the local authority depreciates non-current assets based on 2 per cent a year on the original cost. It also differentiates between one-off, large items of capital expenditure or revenue, on the one hand, and annually recurring items, on the other.
The local authority has a central staff, which includes administrators for each school costing £200,000 a year for each school, and a chief education officer costing £80,000 a year in total.

Required:
(a) Prepare a summary of the relevant cash flows (costs and revenues, relative to not making any closures) under the following options:
1 closure of D only
2 closure of A and B
3 closure of A and C.
Show separately the one-off effects and annually recurring items, rank the options open to the local authority and, briefly, interpret your answer. Note: Various approaches are acceptable provided that they are logical.
(b) Identify and comment on any two different types of irrelevant cost contained in the information given in the question.
(c) Discuss other factors that might have a bearing on the decision.