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capalized cost on new machine
The data for the used and the new machines are shown in the table below: (Use an interest rate of 10% per year). The capitali
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Answer #1

Given, first cost = $-40,000 , Annual cost = $-2000, Salvage value= $10,000, Life = 6 years, i= 10% per year
thus A = -40,000(A/P,10%,6)-2,000+10000(A/F,10%,6)
            = -40,000(.2296)-2,000+10000(.1296)
            = $-9,888
Since, Capitalized cost, CC = A/i
thus the required Capitalized cost, CC = -9,888/.1 =$-98,880.

Hence, the required Capitalized cost for New Machine is $-98,880 …option (b)

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