18 structures are to be built. There are two routes to take. The first route would be to build all 18 structures at once costing a total of $400 million. The second route would be to build 6 structures right now costing $110 million. After 4 years from today 6 more structures would be built costing $130 million. After 8 years from today 6 more structures would be built costing $160 million. After a structure is built its maintenance cost to run is $200,000 every year. This cost is also adjusted for the inflation and the cost of building are paid in full at the start of each year the structure are built. The maintenance cost is paid at the end of each year beginning with the first year. The expected inflation will average 3% and the interest rate is 12%. Which route is the best economical option. Please solve and show all steps to complete this problem.
18 structures are to be built. There are two routes to take. The first route would be to build all 18 structures at once costing a total of $400 million. The second route would be to build 6 structures right now costing $110 million. After 4 years from today 6 more structures would be built costing $130 million. After 8 years from today 6 more structures would be built costing $160 million.
After a structure is built its maintenance cost to run is $200,000 every year. This cost is also adjusted for the inflation and the cost of building are paid in full at the start of each year the structure are built. The maintenance cost is paid at the end of each year beginning with the first year. The expected inflation will average 3% and the interest rate is 12%. Which route is the best economical option.
Please solve and show all steps to complete this problem.
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