Compute the capitalized cost of perpetual service

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Reference no: EM131758760

To decrease the cost of operating a lock in a large river, a new system of operation is proposed. The system will cost $820,000 to design and build. It is estimated that it will have to be reworked every 7 years at a cost of $180,000. In addition, a one-time expenditure of $80,000 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 $70,000 for the first 12 years and $100,000 thereafter. Compute the capitalized cost of perpetual service at i = 6.1%. Enter your answer as a POSITIVE number.

Reference no: EM131758760

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