A Canadian University in the Western region is planning to build a new football stadium to solve the capacity problem it has with the current stadium. The construction will start in 2022 and is planned to take four years at a cost of $10 million per year. After construction is completed, the cost of operation, maintenance and repairs is expected to be $2 million for the first year, and to increase by 1% per year thereafter. Major overhauling (major repair) for the stadium is to take place during the year 2047 at a cost of $8 million. The salvage/scrap value of the stadium at the end of the year 2070 is estimated at $15 million. Consider the present to be the end of 2017/beginning of 2018 and the interest rate to be 6%.
a) Draw a cash flow diagram for this project ( from present till the end of the year 2070).
b) Find the Present Worth of this project.
c) Find is the Future Worth of this project (Hint: make use of the PW calculated in b).
A Canadian University in the Western region is planning to build a new football stadium to solve the capacity problem it has with the current stadium. The construction will start in 2022 and is planned to take four years at a cost of $10 million per year. After construction is completed, the cost of operation, maintenance and repairs is expected to be $2 million for the first year, and to increase by 1% per year thereafter. Major overhauling (major repair) for the stadium is to take place during the year 2047 at a cost of $8 million. The salvage/scrap value of the stadium at the end of the year 2070 is estimated at $15 million. Consider the present to be the end of 2017/beginning of 2018 and the interest rate to be 6%.
a) Draw a cash flow diagram for this project ( from present till the end of the year 2070).
b) Find the Present Worth of this project.
c) Find is the Future Worth of this project (Hint: make use of the PW calculated in b).
