(a) For purposes of this subpart, the purchase or construction cost of a capital asset is--
(1) The estimated cost to purchase or construct the asset; plus
(2) Ancillary costs such as delivery and installation; plus
(3) The net present value of the estimated future cost to provide any other service or benefit requested by the applicant in its proposal to obtain the capital asset.
(b) The estimated cost to purchase or construct must be--
(1) Reasonable;
(2) Based on realistic current market conditions; and
(3) Based on the expected useful life of the asset in mass transportation service, as indicated in paragraph (c) of this section.
(c) For purposes of this part, the expected useful life of a revenue vehicle is the useful life which is established by FTA for recipients of Federal assistance under FTA's Circulars for section 9 recipients. For assets other than revenue vehicles, the applicant is responsible for establishing a reasonable expected useful life. If the recipient does not intend to use the capital asset it is proposing to obtain by lease in mass transportation service for its entire expected useful life, when calculating the purchase cost, the recipient must calculate the fair market value of the asset as of the date the lease will terminate pursuant to Guidelines found in section 108(b) of part II Standard Terms and Conditions for valuation of property withdrawn from transit use before the end of its useful life and subtract that amount from the purchase price. The resulting amount is the purchase price for purposes of this rule.