1. A) A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,294.00 to install, $5,151.00 to operate per year for 7 years at which time it will be sold for $6,930.00. The second, RayCool 8, costs $41,464.00 to install, $2,183.00 to operate per year for 5 years at which time it will be sold for $8,907.00. The firms cost of capital is 5.33%. What is the equivalent annual cost of the AC360?

B) A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,129.00 to install, $5,184.00 to operate per year for 7 years at which time it will be sold for $7,101.00. The second, RayCool 8, costs $41,159.00 to install, $2,022.00 to operate per year for 5 years at which time it will be sold for $9,080.00. The firms cost of capital is 5.49%. What is the equivalent annual cost of the RayCool8?

2. A) A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,033.00 per year for 8 years and costs $101,232.00. The UGA-3000 produces incremental cash flows of $27,533.00 per year for 9 years and cost $124,285.00. The firms WACC is 8.57%. What is the equivalent annual annuity of the GSU-3300?