A new bridge connecting Tuguegarao and Solana with a 100 year life is expected to have an initial cost of $20 M. The bridge must be resurfaced every five years at a cost of $ 1 M. The annual inspection and operating costs are estimated to be $50, 000. Determine the present cost of the bridge using the capitalized equivalent approach (that is the life of the bridge as infinite), if the interest rate is 10% per compounded annually.
A new bridge connecting Tuguegarao and Solana with a 100 year life is expected to have an initial cost of $20 M. The bridge must be resurfaced every five years at a cost of $ 1 M. The annual inspection and operating costs are estimated to be $50, 000. Determine the present cost of the bridge using the capitalized equivalent approach (that is the life of the bridge as infinite), if the interest rate is 10% per compounded annually.
Chapter1: Financial Statements And Business Decisions
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![A new bridge connecting Tuguegarao and Solana with a 100 year life is expected to
have an initial cost of $20 M. The bridge must be resurfaced every five years at a cost
of $ 1 M. The annual inspection and operating costs are estimated to be $50, 000.
Determine the present cost of the bridge using the capitalized equivalent approach
(that is the life of the bridge as infinite), if the interest rate is 10% per compounded
annually.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5e34e21a-ca77-4634-b301-eb94ef15236d%2F89c5e506-2655-423a-94ac-484dee0c4d9d%2Fx5p75mi_processed.png&w=3840&q=75)
Transcribed Image Text:A new bridge connecting Tuguegarao and Solana with a 100 year life is expected to
have an initial cost of $20 M. The bridge must be resurfaced every five years at a cost
of $ 1 M. The annual inspection and operating costs are estimated to be $50, 000.
Determine the present cost of the bridge using the capitalized equivalent approach
(that is the life of the bridge as infinite), if the interest rate is 10% per compounded
annually.
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