Chapter 04, Problem 054 (Video Solution) A flood control project at Pleasant Val

Question

Chapter 04, Problem 054 (Video Solution) A flood control project at Pleasant Valley dam is projected to cost $2,490,000 today, have annual maintenance costs of $47,000, and have major inspection and upkeep after each 7-year interval costing $280,000. If the interest rate is 7%/year. Click here to access the TVM Factor Table Calculator Step 1 2 Your answer has been saved and sent for grading. See Gradebook for score details Determine the capitalized cost of Annual Maintenance. $ 1133829 Round entry to 0 decimal places. The tolerance is ±1 LINK TO TEXT LINK TO VIDEO By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. Attempts: 1 of 1 used You have surpassed the number of attempts to earn Maximum Points for this question. For this attempt, and any subsequent attempt(s), you will earn points according to the Point Potential policy set by your instructor Step 2 Determine the capitalized cost of Inspection. $ Round entry to 0 decimal places. The tolerance is ±14. By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. Attempts: 0 of 1 used SAVE FOR LATER SUBMIT ANSWER Earn Maximum Points available only if you answer this question correctly in your first attempt

Explanation / Answer

The future avlue of 7% for 7 years = ((1.07^7 )-1)= 60.57% for term of 7 years

The Present Value of the inspection infinity that needs to be capitalised = $280000/60.57% = $ 46,227,505.

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