A. A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,807.00 to install, $5,194.00 to operate per year for 7 years at which time it will be sold for $6,905.00. The second, RayCool 8, costs $41,561.00 to install, $2,011.00 to operate per year for 5 years at which time it will be sold for $9,029.00. The firms cost of capital is 5.92%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.

B. A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,757.00 to install, $5,125.00 to operate per year for 7 years at which time it will be sold for $7,182.00. The second, RayCool 8, costs $41,968.00 to install, $2,102.00 to operate per year for 5 years at which time it will be sold for $8,983.00. The firms cost of capital is 6.93%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.