What interval should be scheduled for maintenance

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Reference no: EM131106109

The initial cost of a bridge that is expected to be in place forever is $70 million. Maintenance can be done at 1-, 2-, 3-, or 4-year intervals, but the longer the interval between servicing, the higher the cost. The costs of servicing are estimated at $83,000, $91,000, $125,000, and $183,000 for intervals of 1 through 4 years, respectively. What interval should be scheduled for maintenance to minimize the overall equivalent annual cost? The interest rate is 8% per year.

Reference no: EM131106109

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