Question

Team Exercise 5-4: The new Physics & Astronomy and Interdisciplinary Science Building (PAÍS) cost $35M to build. It annual O&M budget is $2.75M. PAÍS' useful life is estimated at 45 year. What is the building's capitalized cost and annualized capital cost if UNM uses an 18% internal interest rate?

Answer 1

First solution

Calculation of capitalized cost + k= tc & Om no RC-SV (1+i)n-1 where, k = capitalized cost FC = First Lost om = cost Operating maintanence RC = Replacement cost SV = Salvage value interest rate n = number of years, (life) Given in question : FC = $35M 4 + mo n = 45 years om=$2.75m RC = $35M sv=0 18.1

Solution for annualized capital cost

Substituting in the formula's K = 35+2.75 + 35-0 (17-18)45-1 50. 278 + 0.0204 = $50.2984 m (approx) Note :- When the replacement Lost not given, FC us treated as Re. Annualized capital cost Annual cost = annual interest on investment det annual operation & maintenue & annual depreciation cost AC = Fcoi tom + (RC-su). (1+i)" - 1 = 35 (0.18) + 2.75 +(35-0.) 0.18 (1+118)45-1 - 6.3+2.75 +0.0037 89.0537m (approx)