Question

Lubbock county is planning to construct a bridge across the Rio de Lubbock to facilitate afternoon skiing in the El Dusto ski basin. The first cost of the bridge will amount to $6,500,000. Annual maintenance and repairs will amount to $25,000 for each of the first five years, to $30,000 for each of the next 10 years and to $35,000 for each of the next 5 years. In addition, a major overhaul costing $500,000 will be required at the end of the tenth year. Use an interest rate of 5% and determine the equivalent uniform annual cost for a 20 year period. Please enter your answer without '$' sign.

Answer 1

Answer:

575,010.25

Explanation:

i = 5%. n = 20 Years. P = 6,500,000.

Annual Maintenance Cost for the first five years, A1 = 25,000.

Annual Maintenance Cost from year 6 thro' 15, A2 = 30,000.

Annual Maintenance Cost from year 16 thro' 20, A3 = 35,000.

Overhaul Costs = 500,000 at year 10.

EUAC = [6,500,000 + 500,000 (P/F, 5%, 10)] (A/P, 5%, 20) +

25,000 +[{5000 (F/A, 5%, 5) + 5000(F/A, 5%, 15)} (A/F, 5%, 20)]

= [6,500,000 + 500,000 (0.6139)] (0.0802) +

25,000 +[{5000 (5.526) + 5000 (21.579)}(0.0302)]

= 545,917.39 + 29,092.86 = 575,010.25