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.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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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.
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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