l.(5 pts) ACME Construction Co. is planning to build a bridge over the Yukon Riv

Question

l.(5 pts) ACME Construction Co. is planning to build a bridge over the Yukon River in Alaska. The state of Alaska has specified that the bridge must last forever. What is the present worth (capitalized cost for the bridge? Assume i 10%. In the table below, you can find all the associated costs for the project. You must draw cash flow diagram (use other side of the sheet.) Cost Year 250,000,000 Initial Investment ear 0 $150,000,000 One time reinvestment Year 10 $50,000 Annual O&M; Costs Per year, for n oo Major Maintenance Costs $100,000 First one on year 15, then every 15 years

Explanation / Answer

Present Value = 250,000,000 + 150,000,000/(1.1)^10 + 50,000/(0.1) + (100,000/(1.1)^15 + 100,000/(1.1)^30 + 100,000/(1.1)^45 ......)

=> PV = 400,500,000 + (100,000 / 0.1 x (1.1)^15) = $ 400,739,392

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