A city plans to upgrade its storm water management infrastructure by installing newpipes. The installation costs 2.7 million dollars and the annual maintenance cost is$27,000. Every 8 years, the system needs to be fully examined which requires a fixedmanagement and material cost of $20,000 and a variable labor cost at the rate of $27/hr.20 full time (working 8 hours per day) workers will be employed for 80 days for this task.If the infrastructure has a life time of 96 years and the city's interest rate is 7%,(Please round your answer to two decimal places at the million level for bothquestions, e.g. '1.23' millions)a. what is the capitalized worth of the project (in millions)? Please note that the valuecould be negative.

In this we need to find the present value of all cost required during the life of project.

Answered: city plans to upgrade its storm water…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 13E

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