Problem:
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,900 and sell its old washer for $2,900. The new washer will last for 6 years and save $1,650 a year in expenses. The opportunity cost of capital is 16%, and the firm's tax rate is 40%.
Task:
What is the equivalent annual cost of the washer, if the firm uses straight-line depreciation? Please provide step by step solution and also provide all workings.