The Transportation Service Directorate of a Municipality wants to purchase a new software system to charge and track toll fees. The director wants to know the total capitalized cost of the software system. The system has an initial installment cost of 150 000 pbr and an additional cost of 50 000 pbr after 10 years. Annual software maintenance cost is 8000 pbr and starts at year five. In addition, there is expected to be a recurring major upgrade cost of 15000 pbr every 13 years. Assume that i=5% per year. If the new system will be used for the indefinite future, draw the cash flow diagram and find the capitalized cost of the investment.
The Transportation Service Directorate of a Municipality wants to purchase a new software system to charge and track toll fees. The director wants to know the total capitalized cost of the software system. The system has an initial installment cost of 150 000 pbr and an additional cost of 50 000 pbr after 10 years. Annual software maintenance cost is 8000 pbr and starts at year five. In addition, there is expected to be a recurring major upgrade cost of 15000 pbr every 13 years. Assume that i=5% per year. If the new system will be used for the indefinite future, draw the cash flow diagram and find the capitalized cost of the investment.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 14P
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Question
The Transportation Service Directorate of a Municipality wants to purchase a new
software system to charge and track toll fees. The director wants to know the total capitalized cost of
the software system. The system has an initial installment cost of 150 000 pbr and an additional cost of
50 000 pbr after 10 years. Annual software maintenance cost is 8000 pbr and starts at year five. In
addition, there is expected to be a recurring major upgrade cost of 15000 pbr every 13 years. Assume
that i=5% per year. If the new system will be used for the indefinite future, draw the cash flow
diagram and find the capitalized cost of the investment.
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