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A major city in West of Canada is planning to build a new bridge to...

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Accounting

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A major city in West of Canada is planning to build a new bridge to decrease the traffic load on the two old bridges connecting both sides of the city across the river. Construction is to start in 2020 and is expected to take four years at a cost of $25 million per year. After construction is completed, the cost of operation and maintenance is expected to be $2.5 million for the first year, to increase by 2.8% per year thereafter. The scrap/salvage value of the bridge at the end of year 2053 is estimated to be $5 million. Consider the present to be the end of 2018/ beginning of 2019 and the interest rate to be 8%. a) Draw a cash flow diagram for this project (from present till end of year 2053). (7 Marks) b) Find the Present Worth of this project. (10 Marks) c) Find the Future Worth of this project. (8 Marks)

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