KL Limited is replacing an existing machine. The replacement cost of the machine is 1,00,000 now and it requires maintenance of 20,000 at the end of…

CA Intermediate · Financial Management and Strategic Management · PYQS · September 2025
KL Limited is replacing an existing machine. The replacement cost of the machine is 1,00,000 now and it requires maintenance of 20,000 at the end of every year for five years. At the end of Fifth year, it would have a salvage value of 10,000. The cost of capital is 14%. PVIFA 0.14,5 is 3.433 and PVIF 0.14,5 is 0.519. What will be the Equivalent Annual Cost (EAC) for the machine?
(A) ₹ 57,617
(B) ₹ 45,217
(C) ₹ 47,617
(D) ₹ 60,217

Suggested Answer and Working Notes:

Correct Answer: Option (C)

₹ 47,617

Topics: Part-A: Financial Management

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