A city is spending $20.7 million on a new sewage system. The expected life of the system is 50 years, and it will have no market value at the end of its life. Operating and maintenance expenses for the system are projected to average $0.8 million per year. If the city's MARR is 11% per year, what is the capitalized worth of the system? The study period is 100 years. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. The capitalized worth of the system is $S million (Round to two decimal places.)
A city is spending $20.7 million on a new sewage system. The expected life of the system is 50 years, and it will have no market value at the end of its life. Operating and maintenance expenses for the system are projected to average $0.8 million per year. If the city's MARR is 11% per year, what is the capitalized worth of the system? The study period is 100 years. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. The capitalized worth of the system is $S million (Round to two decimal places.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please help. I don't understand how to calculate A/P.
Transcribed Image Text:A city is spending $20.7 million on a new sewage system. The expected life of the system is 50 years, and it will have no market value at the end of its life. Operating and maintenance expenses for the system are
projected to average $0.8 million per year. If the city's MARR is 11% per year, what is the capitalized worth of the system? The study period is 100 years.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year.
The capitalized worth of the system is $S million. (Round to two decimal places.)
Expert Solution
Step 1
The capitalised cost or worth of a specific project or investment provides an approximation of the project's current equivalent cost. The predicted annual costs, the annual interest rate, and the opportunity cost of capital all have an impact on the capitalised value.
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