Establishment of a new lab requires an initial investment of $240,000 and annual costs of $85,000 for ever. What is the capitalized cost of this lab investment given an annual interest rate of 4%? OA. $2,365,000 OB. $2,134,600 OC. $2,125,000 OD. $2,322,925 OE. $1,885,000

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Establishment of a new lab requires an initial investment of $240,000 and annual costs of $85,000 for ever. What is the capitalized cost of this lab investment given an annual interest rate of 4%?
OA. $2,365,000
OB. $2,134,600
OC. $2,125,000
OD. $2,322,925
OE. $1,885,000
GEECH
Transcribed Image Text:Establishment of a new lab requires an initial investment of $240,000 and annual costs of $85,000 for ever. What is the capitalized cost of this lab investment given an annual interest rate of 4%? OA. $2,365,000 OB. $2,134,600 OC. $2,125,000 OD. $2,322,925 OE. $1,885,000 GEECH
Expert Solution
Step 1: Explain the capitalization cost

Capitalization cost refers to the annual cost added to the initial investment or initial cost basis. These expenses are calculated after discounting with the interest rate over a period of time.

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