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 year.
(a) If the interest rate is 5%, determine the capitalized-equivalent cost of the bridge.
(b) Suppose that the bridge must be renovated every 15 years, not every 10 years. What is the capitalized cost of the bridge if the interest rate is the same as in (a)?
(c) Repeat (a) and (b) with an interest rate of 10%. What can you say about the effect of interest on the results?