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Question

How much money would have to be placed in a sinking fund each year to replace a machine costing $25,000 today at

the end of 10 years if the fund yields 8% annual interest rate compounded yearly and if the cost of the machine is assumed to increase at 5% annually for the next 10 years? Assume the salvage value is zero.

$2,809.84

$1,987.50

$1,725.00

$2,247.87

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