Consider a prospective investment in a project having a first cost of $300,000, operating and maintenance costs of $35,000 per year, and an estimated net disposal value of $50,000 at the end of thirty years. Assume an interest rate of 8%.
What is the present equivalent cost of the investment if the planning horizon is thirty years?
a) $670,000
b) $689,000
c) $720,000
d) $791,000
If the project replacement will have the same first cost, life, salvage value, and operating and maintenance costs as the original, what is the capitalized cost of perpetual service?
a) $670,000
b) $689,000
c) $720,000
d) $765,000