The Catlovers Forever Society of Oshawa wants to donate a marble bird bath to th
ID: 2506741 • Letter: T
Question
The Catlovers Forever Society of Oshawa wants to donate a marble bird bath to the McLaughlan Park as a memorial (and automatic feeder) for cats. The CFSO wants to set up a perpetual care fund to cover future expenses for 75 years. The initial cost is $5,000 and routine maintenance will cost $200 per year. Every 5th year, a major cleaning must be done, at an extra cost of $300. The bath is to be demolished after 75 years, with the last $500 covering the demolition costs. If the MARR is 8%, what is the capitalized cost of this project?
Explanation / Answer
Capitalized Cost = P.V. of payments
= 5000 + 200*PVA(8%,75) + 300*[PV(8%,5) + PV(8%,10) + ... PV(8%,70)] + 500*PV(8%,75)
= 5000 + 200*12.4582 + 300*2.1210 + 500*0.003113
= 8129.49
THUS, CAPITALIZED COST IS $8130