Compute the equivalent annual cost

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A new oil pump costs $9000 and has no salvage value once installed. The manufacturers warranty will pay the 1st year maintenance and repair costs. In the 2nd year, costs will be $900, and they will increase on a $900 arithmetic gradient in subsequent years. Also operating expenses for the pump will be $500 the first year and will increase on a $500 arithmetic gradient in the following years. If the interest rate is 8%. compute the pump's equivalent annual cost in its 4th year of operation.

Reference no: EM131165478

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