The UAE government is going to build a bridge between two of its islands in the...

The UAE government is going to build a bridge between two of its islands in the Arabian Gulf Sea to allow the residences of these two islands to communicate with each other’s and with the rest of the country. The government will sign a long time contract with the biggest international company in this field to be responsible for this project.

The government will pay an initial cost of 100,000,000 Dhs, a major re-design to fix any bugs in the initial design after 10 years of 35,000,000 Dhs, a major maintenance every 15 years of 15,000,000 Dhs, an annual maintenance of 6,000,000 Dhs for the first 6 years, and then an annual maintenance of 11,000,000 Dhs after that. The annual interest rate for this project is 8%.

Draw an LCM cash flow diagram for the first two cycles of the project from the government’s point of view.

If this project lasts for indefinite time then find the approximate equivalent value now.

Expert Solution

Rahul Sunny answered 8 months ago

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