5 Expenses for water treatment at a state park are expected

5) Expenses for water treatment at a state park are expected to be $60,000 now, $25,000 in year one, and $10,000 per year thereafter forever. At an interest rate of 10% per year, the capitalized cost of the treatment is nearest to: a. -182,728 b. -195,642 5 c. -173,638$ d. -200, 039 $

Solution

Interest rate = 10%

Capitalized cost = 60000 + 25000/1.1 + 10000 x (1/1.1² + ...)

Capitalized cost = 82727.3 + 100000/1.1 = $ 173636.4

Option c is correct