1.)

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,250.00 to install, $5,000.00 to operate per year for 7 years at which time it will be sold for $6,898.00. The second, RayCool 8, costs $41,270.00 to install, $2,195.00 to operate per year for 5 years at which time it will be sold for $8,987.00. The firms cost of capital is 5.09%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.

2.)

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 $25,688.00 per year for 8 years and costs $99,861.00. The UGA-3000 produces incremental cash flows of $27,828.00 per year for 9 years and cost $123,340.00. The firms WACC is 9.60%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

3.)

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 $25,161.00 per year for 8 years and costs $102,027.00. The UGA-3000 produces incremental cash flows of $28,038.00 per year for 9 years and cost $125,740.00. The firms WACC is 9.20%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.