Homework Course – 4 1. Compare the alternatives shown below the basis of their capitalized cost. Use I =14 % Alternative U Alternative W First costs, $ 8,500,000 50,000,000 Annual operating cost, $ 8,000 7,000 Salvage value, $ 5,000 2,000 Life, years 5 ∞ 2. Compare the machine shown below on the basis their capitalized cost using an interest rate of 16% per year Machine M Machine N First costs, $ 31,000 43,000 Annual operating cost, $ 18,000 19,000 Salvage value, $ 5,000 7,000 Life, years 3 5 3. The first cost of a small dam is expected to be $3 million. The annual maintenance cost is estimated to be $10,000 per year; a $35,000 outlay will be required every 5 years. In addition an expenditure of $5000 in year 10 will be required, increasing by $1000 per year through year 20, after which it will remain constant. If the damn is expected to last forever, what will be its capitalized cost at an interest rate of 10% per year?