Planning is made for road maintenance project

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Long range planning is made for a road maintenance project. Design A has an initial cost of 5,000,000 (equipment) and requires major upgrades every five years at a cost of 1, 250,000 and yearly cleaning costs of 700,000. Design B requires 4,000,000 in initial cost. Yearly cost of 600,000 and major upgrades every ten years of 2,000,000. Interest rate for this problem is 6% per year. What are the capitalized costs and which is better?

Reference no: EM131529292

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