Question

Fun Land would like to build a new splash fountain for the city park. The first...

Fun Land would like to build a new splash fountain for the city park. The first cost of the fountain will be $864,107. Annual maintenance and repairs are estimated to be $22,525, increasing by 2% per year. The fountain will have a major overhaul at the end of year 10 at a cost of $52,213. The splash fountain has an expected lifespan of 28 years. Using a nominal annual interest rate of 2%, calculate the equivalent uniform annual cost (EUAC) of the splash fountain.

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Answer #1
Particulars Amount
Terminal cash flow 52213
× PVF 0.82035
Present value               42,833
Add: annual cash flows             630,700
Add: investment             864,107
Total costs         1,537,640
/ PVAF 21.28127
EUAC 72,253.19

Answer is:

72,253.19

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