ay, yo
to do each of the four major maintenance items separately, each a year
apart. You estimate that the cost of these repairs is $250,000 each, the first
beginning at the end of the 23$^{rd}$ year. To insure that sufficient funds are
available (you'll be retired in 23 years, but you want to leave a good legacy
of yourself), you decide that the HT&K should set up a sinking fund just for
this future work.
1. How much should be deposited each year so that at the end of 23
years there will be enough in the account to have $250,000 available
per year for the four years? Assume $i$ = 2% for the first 5 years, 3%
for the next 13 years and 4% from then on. Assume the first deposit
is made a year after the bridge opens.
2. The president of the railroad thinks this is a great idea! So he asks
you, what annual payment must we make into a sinking fund to have
the money available to start the same 4-year cycle of repairs every 25
years? Rather than a sinking fund, what lump sum must be
deposited in year 23, and every 25 years after that, to also have
sufficient funds available for the 4-year cycle of repairs? (Use $i$ =
4%/yr.)
