Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $250 million. Annual upkeep is expected to amount to $800,000. The turf will have to be replaced every 10 years at a cost of $950,000. Painting every 5 years will cost $75,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i = 8% per year?
What will be an ideal response?
CC = -250,000,000 – 800,000/0.08 – [950,000(A/F,8%,10)]/0.08
- 75,000(A/F,8%,5)/0.08
= -250,000,000 – 800,000/0.08 – [950,000(0.06903)]/0.08
-[75,000(0.17046)]/0.08
= -250,000,000 – 10,000,000 – 819,731 – 159,806
= $-260,979,538
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