Information provided:
Annual payment= $1.40 million
Time= 5 years
Yield to maturity= 5%
The question is calculated by computing the present value.
Enter the below in a financial calculator to compute the present value:
PMT= 1.40
I/Y= 5
N= 5
Press the CPT key and PV to compute the present value.
The value obtained is 6.06
Therefore, the equipment will cost $6.06 million.
Hence, the answer is option d.
In case of any query, kindly comment on the solution.
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