Question

The newly elected city mayor decides to construct a new levee system near a major river through town. The estimated life of such a structure will be 40 years. Total initial costs (consulting fees and construction) is $800,000. Maintenance cost are estimated to be $30,000 (current dollars) every 5 years. The annual discount rate for the city is 5%.

Find: Present worth life-cycle costs for the levee system.

Answer 1

discount rate for the city is (r) = 5%.

Maintenance cost is (m) = $30,000 for every 05 years

Again maintenance cost will be happen $30,000 in 10 Years , 15 Years total 08 Times.

So

Present Value of All Maintenance Cost

Now

PV(m) = ( 30000/ 1.276) * 3.963 = 93,160.86

Initial Construction Cost =  $800,000

Present worth life-cycle costs = Initial Construction Cost + Present Value of All Maintenance Cost

= $800,000 + $93,160.86 = $ 893,160.86

Ans : Present worth life-cycle costs   $ 893,160.86