Question 4 (25 points) A large mudslide caused by heavy rains will cost Sabino County $1,000,000 per occurrence in lost property- tax revenues. In any given year there is one chance in 100 that a major mudslide will occur. A civil engineer has proposed constructing a culvert on a mountain where mudslides are likely. The culvert will reduce the likelihood of a mudslide to almost zero. The capital investment would be $50,000, and annual maintenance expenses would be $2,000 in the first year, increasing by 5% per year thereafter. If the life of the culvert is expected to be 20 years, the culvert has no salvage value and the cost of capital to Sabino County is 10% per year, a) b) c) d) Calculate the expected cost of the mudslide per year. (10 points) Draw the cash flow diagram for the culvert. (5 points) Calculate the annual cost of the project. (8 points) Comment if the culvert should be built. (2 points)