A water Reservoir will have a first cost of Php 10,000,000,000, an annual maintenance cost of 35,000,000, and minor reconstruction costs of 3,000,000 every five years. What the capitalized cost of the reservoir at an interest rate of 10% per year?

A water Reservoir will have a first cost of Php 10,000,000,000, an annual maintenance cost of 35,000,000, and minor reconstruction costs of 3,000,000 every five years. What the capitalized cost of the reservoir at an interest rate of 10% per year?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 15EA: Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years....

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

A water Reservoir will have a first cost of Php 10,000,000,000, an annual maintenance cost of
35,000,000, and minor reconstruction costs of 3,000,000 every five years. What the capitalized
cost of the reservoir at an interest rate of 10% per year?

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