3. Boone County Commissioners want to construct a road to provide another access

Question

3. Boone County Commissioners want to construct a road to provide another access to a
new development to reduce emergency response time. The cost of the road is $350,000.
It is estimated that it will cost $2500 to maintain the road the first year. Maintenance
costs will increase by $300 each year after the first year. Every 25 years the County will
replace the road with a new, identical system. The County commissioners want to know
the Capitalized Costs of the road system if they can get 7% interest on their money.

Explanation / Answer

Initial cost 350,000 Maintance=principal + 300 every year compounded 2500+2800+3100+3400+3700+4000+4300+4600+4900+5200+5500+5800+6100+6400+6700+7000+7300+7600+7900+8200+8500+8800+9100+9400+9700+10000+10300=172,800 Total cost is 350,000+172,800=522,800 every 25 years for a road. The capitalized cost is 522,800*(1+interest)^time in years =522,800(1.07)^25=2,837,461.78

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.