Question

Given the following three alternatives, the equation for capitalized cost (CW) of alternative F at i=10% is:

Alternative	E	F	G
First Cost, $	-50,000	-300,000	-900,000
AOC, $ per year	-30,000	-10,000	-3,000
Salvage value, $	5,000	70,000	200,000
Life, years	2	4	∞

Group of answer choices

A.) CW(F) =( -300,000(A/P,10%,4) – 10,000 + 70,000(P/F,10%,4) )/0.1

B.) CW(F) =( -300,000(P/A,10%,4) – 10,000 + 70,000(P/F,10%,4) )/0.1

C.) CW(F) =( -300,000(A/P,10%,4) – 10,000 + 70,000(A/F,10%,4) )(0.1)

D.) CW(F) =( -300,000(A/P,10%,4) – 10,000 + 70,000(A/F,10%,4) )/0.1

Answer 1

Calculation of Capitalized Cost (CW) Using the Equation

Capitalized Cost (CW) means present worth of cash flows which go on for infinite period of time. This analysis used in basically work project like Dam Bridges & Park.  

The Basic Equation of Capitalized cost (CW) is

P = A/i

That Means A = Pi or P = A/i

Here Given Date

In F First Cost $ (FC) = -300000

Annual Operating Cost (AOC = -10000

Salvage Value (SV) = 70000

Life Span Year = 4

Calculation of Capitalized Cost (CW) using the Equation is

= FC(AP,10% 4) - AOC+SV (A/F, 10% 4)/0.1

= -300000 (AP, 10% 4) - 10000+70000(A/F, 10%, 4)/0.1

In Your Option Correct Answer is - D

That is -300000 (AP, 10% 4) - 10000+70000(A/F, 10%, 4)/0.1