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Accountancy

Suppose Suzy Cake's Sweets is considering investing in a warehouse-management software that costs $550,000, has $65,000 residual value, and should lead to cost savings of $125,000 per year for its five year life. Calculating the ARR, which of the following figures should be used as the equations denominator (average amount invested in the asset?)

A. $275,000

B. $615,000

C. $242,500

D. $307,500

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