A machine that has been used for one year has a salvage value of $15,000 now which will drop by $2,000 per year. The maintenance costs for the next two years are $1,000 and $3,000. All the above values are expressed in real terms. It is also known that market interest rate over next 2 years will be 8% while expected inflation is 2% per year. Define the equivalent annual cost of the machine over 2 years in today's dollars.

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Anscwer Real interest rate 8 21 6 Salvage v... View the full answer