The correct answer is A. Rs. 31050.
The sinking fund factor is the amount of money that must be invested each year at a given interest rate in order to accumulate a given sum at the end of a given period of time. In this case, the sinking fund factor is 0.069, which means that an investment of Rs. 0.069 will grow to Rs. 1 in 10 years at an interest rate of 8%.
The amount that must be set aside each year to replace the earth moving equipment is equal to the cost of the equipment minus the salvage value, divided by the sinking fund factor. In this case, the amount is Rs. (500000 – 50000) / 0.069 = Rs. 31050.
Option B is incorrect because it is the amount that must be set aside each year to replace the earth moving equipment if the interest rate is 6%. Option C is incorrect because it is the amount that must be set aside each year to replace the earth moving equipment if the interest rate is 10%. Option D is incorrect because it is the cost of the earth moving equipment.