Question: The municipality of a major city in East of Canada is planning to build a new bridge to decrease the traffic load on the two old bridges connecting both sides of the city across the river. Construction is to start in 2015 and is expected to take four years at a cost of $25 million per year. After construction is completed, the cost of operation and maintenance is expected to be $2.5 million for the first year, and increase by 2.8% per year thereafter. The scrap/salvage value of the bridge at the end of year 2048 is estimated to be $5 million. Consider the present to be the end of 2013/beginning of 2014 and the interest rate to be 8%.
a) Draw a cash flow diagram for this project (from present till end of year 2048).
b) Find the Present Worth of this project.
c) Find the Future Worth of this project.