A newly constructed bridge costs $15,000,000. The same bridge is estimated to need renovation every 15 years at a cost of $3,000,000. Annual repairs and maintenance are estimated to be $1,000,000 per year.
(a) If the interest rate is 5%, determine the capitalized cost of the bridge.
(b) Suppose that in (a), the bridge must be renovated every 20 years, not every 15 years. What is the capitalized cost of the bridge?
(c) Repeat (a) and (b) with an interest rate of 10%. What can you say about the effect of interest on the results?