Answer:
Capitalized worth =$13475000
Explanation:
Given data;
Cost of sewage system = $20
Expected life = 40 years
Maintenance expenses = $0.6 million per year
MARR = 8%
Capitalized worth is calculated by using the formula;
<h3>
Capitalized worth = Annual worth/Interest rate---------1</h3><h3>
But </h3>
Annual worth = Initial cost(A/P, 8%, 40) - annual cost----2
From discrete compounding table, the value of (A/P, 8%, 40) at 8% interest rate = 0.0839
Substitute into equation 2, we have
Annual worth = (20,000,000 * 0.0839) -600,000
= 1678000-600,000
<h3>
= $1078000</h3>
Substituting the values into equation 1, we have
Capitalized worth = Annual worth/Interest rate
= $1078000/0.08
=$13475000