1. The first cost of a bridge that is expected to have an infinite life is $10 m
ID: 1200258 • Letter: 1
Question
1. The first cost of a bridge that is expected to have an infinite life is $10 million. The maintenance cost of the bridge will be $150,000 per year. At an interest rate of 10% per year, the annual worth of the bridge is equal to:
$3,200,000
$1,000,000
$1,150,000
$850,000
2. A grateful donor wishes to start an endowment at her alma mater that will provide scholarship money of $40,000 per year beginning now (time 0) and continue indefinitely. If the funds earn 10% per year, the amount that she must donate now is:
$340,000
$400,000
$493,000
$440,000
3. Given that i = 10% and the data below:
Alternative
Project A
Project B
First Cost($)
-50,000
-80,000
Annual Cost ($/yr)
-20,000
-10,000
Salvage value ($)
10,000
25,000
Life, years
3
6
The cost recovery for project A and B are respectively;
CR=$25,128 for project A and CR=$37,084 for project B
CR=$15,128 for project A and CR=$17,084 for project B
CR=$17,084 for project A and CR=$15,129 for project B
CR=$43,126 for project A and CR=$31,600 for project B
Alternative
Project A
Project B
First Cost($)
-50,000
-80,000
Annual Cost ($/yr)
-20,000
-10,000
Salvage value ($)
10,000
25,000
Life, years
3
6
Explanation / Answer
1. A = 10,000,000(0.10) + 150,000
= $1,150,000
2. P = 40,000 / 0.10 = $400,000
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