QUESTION 15 For an infinite analysis period that is used when a service must be

Question

QUESTION 15 For an infinite analysis period that is used when a service must be maintained for an infinite period which is mostly used for governmental analyses A present sum of money needs to be calculated that vill be set aside at some interest rate to The money set aside for future expenditures should increase The interest received on the money can be spent but it is also acceptable to spend some part of the principal It is not possible to save money indefinitely ed the n is re red to rovde ne er ce non inte O O

Explanation / Answer

First option is correct because this method of capitalized cost requires to find the annual cash flow that is generated from the present value of a fund and the same is multiplied with an interest rate. In other words, we use the following rule for indefinite cash flows , CE = PV = A/i

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