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Let the equivalent annual cost be X
Hence, NPV of annual costs for 8 years = X + X/(1+r) + X/(1+r)2 +.....+ X/(1+r)7
= X + X[1 - (1+r)-6]/r
Given r = 0.08
=> NPV = 5.62X
Now, this will be equal to the NPV of the payment made this year and payment to be made next year
=> 5.62X = 155000*4000 + 155000*7500/(1.08)
=> X = 301,741,175.54
Hence, equivalent annual cost = $301,741,175.54
This question has been answered incorrectly twice. Please do not do if you do not know...
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