A newly constructed bridge costs $10 000 000. The same bridge is estimated to be

renovated every 10 years at a cost of $1 000 000. Annual repairs and maintenance

are estimated to be $100 000 per year.

(i) If the interest rate is 5%, determine the capitalized-equivalent cost of the

bridge.

(2 marks)

(ii) Suppose that the bridge must be renovated every 15 years, not every 10

years. What is the capitalized cost of the bridge if the interest rate is the

same as (i)?

(2 marks)

(iii) Repeat (i) and (ii) with an interest rate of 10%. What can you say about the

effect of interest on the results?

(3 marks)

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