Question: 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

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?

Step by Step Solution

★★★★★

3.44 Rating (163 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Given Construction cost 15000000 renovation cost 3000000 every 15 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

891-B-A-F-A (2397).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

A newly constructed bridge costs $10,000,000. The same bridge is estimated to need renovation every 10 years at a cost of $1,000,000. Annual repairs and maintenance are estimated to be $100,000 per...

Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In...

Carr Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,900. The freight and installation costs for the equipment are $515. If purchased, annual...

A newly constructed bridge costs $10 000 000. The same bridge is estimated to be renovated every 10 years at a cost of $1 000 000. Annual repairs and maintenance are estimated to be $100 000 per...

A newly constructed bridge costs $28,000,000. The same bridge is estimated to need renovation every 15 years at a cost of $6,000,000. Annual repairs and maintenance are estimated to be $1,200,000 per...

A newly constructed bridge costs S 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...

A newly constructed bridge costs 915,000,000. The same bridge is estimated to need renovation every 1-5 years at a cost of $3,000,000. Annual repairs and maintenance are estimated to be $1,000,000...

A newly constructed bridge costs $5,000,000. The same bridge is estimated to need renovation every 15 years at a cost of $1,000,000. Annual repairs and maintenance are estimated to be $100,000 per...

A newly constructed bridge costs $ 1 0 , 0 0 0 , 0 0 0 . The same bridge is estimated to need renovation every 1 0 years at a cost of $ 1 , 0 0 0 , 0 0 0 . Annual repairs and maintenance are...

( Engineering Economics ) A newly constructed bridge costs \ ( \ $ 5 , 0 0 0 , 0 0 0 \ ) . The same bridge is estimated to need renovation every 1 0 years at a cost of \ ( \ $ 1 , 0 0 0 , 0 0 0 \ ) ....

If earth is supposed to be a sphere of radius R, if gao is value of acceleration due to gravity at latitude of 30 and g at the equator, the value of g - gao is (A) tuR (B) uR (C) wR (D) uR

Determine whether {1, cos 2x, 3 sin2x} is linearly dependent or independent.

Question 9 3 pts Banks and other financial services institutions must complete a currency transaction report when: the individual identifies that the proceeds come from a marijuana related business...

5. In the test anxiety example of problems 3 and 4, using a normal curve table, what is the lowest score on the test anxiety measure a person has to have to be in (a) the top 40%, (b) the top 30%,...

What is the present worth of the following series of payments? (a) $1,000 at the end of each year for eight years at 7.2% compounded annually. (b) $4,500 at the end of each year for 12 years at 9.5%...

You borrowed $15,000 from a bank with the agreement that you repay the balance in 10 equal annual installments at an interest rate of 9%. What should be the required annual payment size?

You have borrowed $50,000 at an interest rate of 12%. Equal payments will be made over a three-year period. (The first payment will be made at the end of the first year.) What will the annual payment...

question1-5 , i , = l U canvasasuedu 0, , o El Quiz: QUIZ: t-iiests m 2021FaIIC . QUIZ: t-tests M QUESt'Ons Home uestion 1 Started: Sep 26 at 6:29pm 0 . 6') Question 2 Announcements . . _ Q Qunz...

Crosby Industries has a debt-equity ratio of 1.3. Its WACC is 8 percent, and its cost of debt is 5 percent. There is no corporate tax. Requirement 1: What is Crosby's cost of equity capital? (Do not...

Use the formula to find the standard error of the distribution of differences in sample means,x1-x2 . Samples of size115 from Population1 with mean93 and standard deviation10 and samples of size90...