Public sector projects (e.g. bridges, dams etc) usually have long expected useful lives. Capitalized cost analysis...

   

Transcribed Image Text:

Public sector projects (e.g. bridges, dams etc) usually have long expected useful lives. Capitalized cost analysis is a technique in which the present worth is calculated for projects with infinite life. Assume an interest rate of 10% per year, calculate the capitalized cost (CC) of a perpetual operating cost which is paid every 5 years forever. The first cash flow starts at t=5. Following is the cash flow diagram. P =? i = 10% per year þ 1 2 3 4 5 6 7 8 9 10 %23 A = -10,000 8 Public sector projects (e.g. bridges, dams etc) usually have long expected useful lives. Capitalized cost analysis is a technique in which the present worth is calculated for projects with infinite life. Assume an interest rate of 10% per year, calculate the capitalized cost (CC) of a perpetual operating cost which is paid every 5 years forever. The first cash flow starts at t=5. Following is the cash flow diagram. P =? i = 10% per year þ 1 2 3 4 5 6 7 8 9 10 %23 A = -10,000 8

Answer rating: 100% (QA)

Capitalized Cost is the present worth of the annual cost that assumed to con... View the full answer