Hi Tutors,

The annual maintenance on the parking lot is $5000.What expenditure would be justified for resurfacing if no maintenance is required for the first 5 years, $2000 per year for the next 10 years, and $5000 a year thereafter? Assume the cost of money is 6%.

I have calculated present value P1 = A *(1+i) pow(n) -1 / ( i* (1+i)n)) = 48561

Total present value for resurfacing (P2) = P + 2000 * (1.06 pow 10 - 1) / (0.06 * 1.06 pow(15)) = P(present value of doing no maintenance) + 10,9999

Could some explain why we set P1=P2