1. A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,399.00 to install, $5,055.00 to operate per year for 7 years at which time it will be sold for $7,127.00. The second, RayCool 8, costs $41,189.00 to install, $2,008.00 to operate per year for 5 years at which time it will be sold for $9,098.00. The firms cost of capital is 5.47%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.

2. A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,457.00 to install, $5,090.00 to operate per year for 7 years at which time it will be sold for $6,924.00. The second, RayCool 8, costs $41,024.00 to install, $2,122.00 to operate per year for 5 years at which time it will be sold for $9,045.00. The firms cost of capital is 5.33%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.