1. Maintenance costs on a bridge are $5,000 every five year starting at the end of year 5. For analysis purposes, the bridge is assumed to have an infinite life. What is the Capitalized Equivalent (CE) cost of these infinite payments, assuming an annual interest rate of 8% compounded annually?
2. Machine A costs $35,000, lasts 3 years and has a salvage value of $7,500. Machine B costs $25,000, lasts 2 years and has a salvage value of $3,500. The machines can be purchased at the same price with the same salvage value in the future, and are needed for 60 years. Which machine would you purchase and why? Interest is 8% annual rate, compounded annually.