Answer to Question #278940 in Economics for emem

Question

Two bridges A and B are to be compared on the basis of capitalized cost at 5% interest. 

Bridge A has an estimated life of 25 years, initial cost of P50M, renewal cost of P35M, annual maintenance  of P0.5M, repairs every five years amounting to P2M and salvage value of P5M. 

Bridge B has an estimated life of 50 years, initial cost of P75M, renewal cost of P75M, annual maintenance  of P0.1M, repairs every five years amounting to P1M and salvage value of P10M. 

The initial cost can paid out of available funds. All other expenses will be defrayed by sinking funds. a. What is the capitalized cost of Bridge A? 

b. What is the capitalized cost of Bridge B? 

c. How much savings is realized by choosing the more economical of the two bridges? 

Answer 1

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