Using £10 000 of his own money and £15 000 borrowedfrom the bank at 1% monthly interest, Nigel has purchased asteam-cleaning machine. Using this machine, he restores the facades of old, soot-covered buildings in London. He can work for ninemonths out of the year – the machine does not work wellduring the winter – and earns £2 000 a month. How much can Nigel pay himself per month if he wants to replace the machine before it becomes worthless, given that it depreciates at 20% per year, straight-line depreciation? If he puts money into a sinkingfund, it will earn 0.5% monthly interest. Assume that Nigel would like to be debt-free by the time that he replaces the machine, and that he wants to buy the replacement machine outright, rather than taking out another loan.
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