Solution-What is the annual equivalent cost

What is the annual equivalent cost

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Question - A machine costing £2,000,000 has a useful life of six years, after which time its estimated resale value will be £260,000. Running costs will be zero for the first two years of use and £90,000 for each of the next four years. These running costs are payable on the last day of the year to which they relate. Using a discount rate of 15% p.a., what is the annual equivalent cost of using the machine if it were bought A B C D E and replaced every six years in perpetuity (to the nearest £1,000)?

A. £431,000

B. £550,000

C. £567,000

D. £610,000

E. £626,000

Reference no: EM133069323

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What is the annual equivalent cost

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Reference no: EM133069323

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