A company buys a machine for 10,000 and sells it for 2,000 at Year 3. Running costs of the machine are: Year 1 = 3,000 ; Year 2 = 5,000 ; Year 3 = 5,000 .

If a series of machines are bought, run and sold on an infinite cycle of replacements, what is equivalent annual cost of the machine if the discount rate is 10%? (to calculate you need to use PV interest factors and PV interest factor of an ordinary annuity)

Select one:

a. 22,114

b. 8,892

c. 8,288

d. 7,371