Question

The property appraisal district for Marin County has just installed new software to track residential market values for property tax computations. The manager wants to know the total equivalent cost of all future costs incurred when the three county judges agreed to purchase the software system. If the new system will be used for the indefinite future, find the equivalent value (a) now and (b) for each year hereafter. The system has an installed cost of $183131 and an additional cost of $83131 after 18 years. The annual software maintenance contract cost is $3131 for the first 8 years and $4696,5 thereafter. In addition, there is expected to be a recurring major upgrade cost of $18313 every 20 years. Assume that i = 5% per year for county funds.

The Capitalized cost (CC) of the project is

Answer 1

The first purchasing cost is a present worth = $ 183131

Add: Annual Maintenance Cost = 3131/ 0.05 = 62620

After 8 years Maintenance Cost = 4696/0.05 = 93920

Additional Cost after 18years = 83131 (A/F, 5%,,18) = 83131(A/F, 5%, 18) = 83131(0.0355) = 2950

Upgrade Cost = 18313 (A/F, 5%, 20) (P/A, 5%, infinity) = 18313 (.030) (1/0.05) = 10988

Capitalized Cost = $ 353609

So, Capitalized Cost of the project would be = $ 353609