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Can some one please explain with the above mentioned question part?I’m unable to derive answer as per kit
I am sorry but I do not have a Kaplan Kit and so I cannot help you.
(If it is a past exam question then say which exam and I can then find it)I will type question for you as It has never been asked in exam.
Q: A company buys a machine for $11000 & sells it for $2000 at time 3.running cost of the machine are time 1=$3000 ,time 2=$5000,time 3=$7000.
If a series of machines are bought ,run and sold on an infinite cycle of replacements,what is the equivalent annual cost of the machine if discount rate is 10%??
A. $22114
B. $8892
C. $246
D. $7371The first machine has the following flows:
0 (11,000)
1 (3,000)
2 (5,000)
3 (5,000) (7,000 – 2,000)The present value at 10% is $21,612
The EAC = 21,612 / 2.487 = 8,690
Assuming that you have copied the question correctly, then this is one of the errors in the Kaplan Kit (have you checked their website for an errata sheet?)
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