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The city of Nordhag plans a canal to connect lake Waller with the Sea of Seven Winds for transport ships to boost the cities economy.
The city of Nordhag plans a canal to connect lake "Waller" with the "Sea of Seven Winds" for transport ships to boost the cities economy. The initial project costs are estimated to be $15,000,000 for planning and obtaining necessary permissions. The construction costs in years 1 to 15 are estimated to be $3,000,000 each year. The canal will go into service in year 16 and is estimated to have an infinite life if an annual maintenance cost of $100,000 is assumed for the first ten years. After that, the yearly maintenance cost increase to $150,000 afted that, forever. Every ten years, an overhaul is required. This overhaul is estimated to cost $1,000,000 and occurs for the first time when the maintenance cost increase to $150,000. Calculate the capitalized cost for this project using an interest rate of 5%
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