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You purchased an asset for $45M, 12 years ago. It is currently costing $20M per year to keep it running (assume that will continue to
You purchased an asset for $45M, 12 years ago. It is currently costing $20M per year to keep it running (assume that will continue to apply in future also). The salvage value of the old asset is $7M. An equivalent new asset would cost $84M initially plus $8M per year for all maintenance and running costs. For simplicity, use an infinite study period and assume the annual maintenance and running costs of the old machine and the new machine remain constant forever. For what value of the rate of return, r, would the two options be equally attractive? Enter your answer as a percentage. For example, if your answer is 12.3% enter 12.3 The allowed error margin with no deduction is + 0.2. Note that if you were to enter 0.123 or 12.3% your answer would score zero, even though your calculations were correct
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