A newly constructed water treatment facility cost $2 million. It is estimated that the facility will need renovating every 30 years at a cost of $1 million. Annual repairs and maintenance are estimated to be $100,000 per year. At an interest rate of 6%, determine the capitalized cost of the facility

$3,876,667

Explanation:

Capitalized cost = $2,000,000 + ($100,000 / 0.06) + [[$1,000,000*(A/F, 6%, 30)] / 0.06]

Capitalized cost = $2,000,000 + $1,666,667 + [$1,000,000*(0.0126)] / 0.06

Capitalized cost = $2,000,000 + $1,666,667 + $210,000

Capitalized cost = $3,876,667

So, the value of the capitalized cost of th e facility is $3,876,667.