The manager of our biofuels plant has authorized the purchase and installation of new closed-cycle steam production equipment. The system will consist of water treatment modules, pumps, high-pressure boiler, superheater, insulated steam piping, and process control hardware. The fixed capital investment will be $500,000, and the system will have an expected life of 20 years. The plant manager anticipates that onsite steam production will continue indefinitely.

Assume 6 percent interest, compounded quarterly, and no escalation in the cost of future equipment replacements.

Compute the capitalized cost for the project (i.e., the amount that must be set aside now by the plant manager to ensure availability of funds for perpetual reinvestment).