o decrease costs of operating a lock in a large river, a new system of operation is proposed. It will cost P450,000 to design and build. It is estimated that it will have to be reworked every 10 years at a cost of P50,000. I addition, there will be an expenditure of P40,000 at the end of the fifth year for a new type of gear that will not be available until then. The annual operating costs are expected to be P30,000 for the first 15 years and P25,000 a year thereafter. Compute the capitalized cost of perpetual service at i=12%.

o decrease costs of operating a lock in a large river, a new system of operation is proposed. It will cost P450,000 to design and build. It is estimated that it will have to be reworked every 10 years at a cost of P50,000. I addition, there will be an expenditure of P40,000 at the end of the fifth year for a new type of gear that will not be available until then. The annual operating costs are expected to be P30,000 for the first 15 years and P25,000 a year thereafter. Compute the capitalized cost of perpetual service at i=12%.

Name: To decrease costs of operating a lock in a large river, a new system o
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Description: To decrease costs of operating a lock in a large river, a new system of operation is proposed. It will cost P450,000 to design and build. It is estimated that it will have to be reworked every 10 years at a cost of P50,000. I addition, there will be

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 8P

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To decrease the costs of operating a lock in a large river, a new system ofoperation is proposed. The system will cost $650,000 to design and build. It isestimated that it will have to be reworked every 10 years at a cost of $100,000. In addition, an expenditure of $50,000 will have to be made at the end of the fifth year for a new type of gear that will not be available until then. Annual operating costs are expected to be $30,000 for the first 15 years and $35,000 a year thereafter. Compute the capitalized cost of perpetual service at i = 8%.
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