Answer:
$258,434,439.9
Explanation:
Calculation for what is the equivalent annual cost of the contract
Equivalent annual cost = [3,500 x $130,000 x A/P(10%, 5) ]+ [6,500 x $130,000 x P/F(10%, 5) x A/P(10%, 5)]
Equivalent annual cost = [$455,000,000 x 0.2638] + [$845,000,000 x 0.6209 x 0.2638]
Equivalent annual cost =$120,029,000+$138,405,439.9
Equivalent annual cost =$258,434,439.9
Therefore the equivalent cost of the contract is determined to be $258,434,439.9
