A state engineer is evaluating a railway design. She has determined that the station will require $100,000 of heavy maintenance every five

years. The first maintenance will occur at EOY3. The station is expected to last 50 years. The nominal interest rate is 7%. Find the equivalent present value of these periodic maintenance costs using two approaches. [6 points total]

a.Using an effective interest rate [3 points]

b.Using a nominal interest rate [3 points]