Consider a prospective investment in a project having a first cost of \(\$
300,000\), operating and maintenance costs of \(\$ 35,000\) per year, and an
estimated net disposal value of \(\$ 50,000\) at the end of 30 years. Assume an
interest rate of 8 percent.
What is the present equivalent cost of the investment if the planning horizon
is 30 years?
a) \(\$ 670,000\)
c) \(\$ 720,000\)
b) \(\$ 689,000\)
d) \(\$ 791,000\)
If the project replacement will have the same first cost, life, salvage value,
and operating and maintenance costs as the original, what is the capitalized
cost of perpetual service?
a) \(\$ 670,000\)
c) \(\$ 720,000\)
b) \(\$ 689,000\)
d) \(\$ 765,000\)