we want to donate a marble birdbath to the city park as a memorial to cats. we a
ID: 1232118 • Letter: W
Question
we want to donate a marble birdbath to the city park as a memorial to cats. we also want to set up a perpetual care fund to cover future expenses "forever". the initial cost of the bath is $5000. routine annual operating costs are $200 per year, but every fifth year the cost will be $500 to cover major cleaning and maintenance as well as operation.a) what is the capitalized cost of this project if the interest rate it 8%?
b) hoe much is the present worth of this project if it is to be demolished after 75 years? the final $500 payment in the 75th year will cover the year's operating cost and the site reclamation.
Explanation / Answer
Capitalised cost = 5000 + 200/r + 500/r' where r' is effective five year rate (1+r)^5 =1+r r' =0.469 hence Capitalised cost =8566.09
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.