New system of operation is proposed

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Reference no: EM13953030

To decrease the cost of operating a lock in a large river, a new system of operation is proposed. The system will cost $830,000 to design and build. It is estimated that it will have to be reworked every 10 years at a cost of $120,000. In addition, an expenditure of $80,000 will have to be made at the end of the fifth year for a new type of gear that will not be available then.

Annual operating costs are expected to be $70,000 for the first 15 years and $100,000 a year thereafter. Compute the capitalized cost of perpetual service at i=7%

Reference no: EM13953030

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