Problem:
Tool Makers, Inc. uses tool and die machines to produce equipment for other firms. The initial cost of one customized tool and die machine is $850,000. This machine costs $10,000 a year to operate. Each machine has a life of 3 years before it is replaced.
Required:
Question: What is the equivalent annual cost of this machine if the required return is 8%?
Illustrate out in detail and also show all work.