Question

Q ) Construction and maintenance of a steel bridge. The fcapital cost is $100 M  and the bond payoff at year 10 is $50 M. Bond debt service for the first 10 years is $2.5 M per year. Annual O & M for the bridge is $0.5 M and repainting cost every 10 years is $1 M. Using i = 5%. Determine the capitalized cost for the bridge project.

		$100 M
		$150 M
		$0.58 M
		$161.6M

Q) Determine the present worth of a geometric gradient series with a cash flow of $18,960 in year 1 and increases of 9% each year begining of year 7 through year 11. The interest rate is 16% per year.

Answer 1

1. Capitalized cost(in millions) = $ 100 + 50(P/F,5%,10) + 2.5(P/A,5%,10)

Capitalized cost (Non recurring) = 100+50*0.6139 + 2.5*7.7217

Capitalized cost(NR) = $ 150 million

Now calculate for recurring

AW = 1 (A/F,5%,10) + 0.5

AW = 1*0.0795 + 0.5

AW = 0.5795

Capitalized cost = AW/i = 0.5795/0.05 = $ 11.6 million

Capitalized cost = 150+11.6 = $ 161.6 million.

B. PW = 18960(P/F,16%,1) +

PW = 16,344.82 + 32407.4

PW = $ 48,752.43

Here the cash outflow is once in year1 and from yearc7 to 11 grow at a rate 9%. From. Year 2 to end of year 6 no outflow.

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