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c) The Evergreen Point Floating Bridge was constructed with poor quality control. It has already required maintenance in year 2 of $20,000 and year 3
c) The Evergreen Point Floating Bridge was constructed with poor quality control. It has already required maintenance in year 2 of $20,000 and year 3 of $15,000. The bridge has additional maintenance cost in year 5 of $13,000 and is now anticipated to require increased maintenance for years 6 and beyond at an increasing rate (from year 5 value) of 4.5% per year (O\&M yearly from year 5 till year 20). Assume the bridge will be replaced at year 20 and a nominal interest rate of 6%. What is the equivalent value of all of these maintenance costs at year 0 ? d) You have your choice of two loan options. (1) You can borrow $10,000 at an interest rate compounded at 1% per month. (2) Or you can borrow $10,000 at a compound annual interest rate of 13%. If you expect to pay back the loan 4 years from now, which loan option will you take to minimize the amount of interest you are charged? c) The Evergreen Point Floating Bridge was constructed with poor quality control. It has already required maintenance in year 2 of $20,000 and year 3 of $15,000. The bridge has additional maintenance cost in year 5 of $13,000 and is now anticipated to require increased maintenance for years 6 and beyond at an increasing rate (from year 5 value) of 4.5% per year (O\&M yearly from year 5 till year 20). Assume the bridge will be replaced at year 20 and a nominal interest rate of 6%. What is the equivalent value of all of these maintenance costs at year 0 ? d) You have your choice of two loan options. (1) You can borrow $10,000 at an interest rate compounded at 1% per month. (2) Or you can borrow $10,000 at a compound annual interest rate of 13%. If you expect to pay back the loan 4 years from now, which loan option will you take to minimize the amount of interest you are charged
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