Question
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,547.00 to
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,547.00 to install, $5,075.00 to operate per year for 7 years at which time it will be sold for $7,001.00. The second, RayCool 8, costs $41,896.00 to install, $2,127.00 to operate per year for 5 years at which time it will be sold for $9,052.00. The firms cost of capital is 6.36%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
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 $25,451.00 per year for 8 years and costs $101,554.00. The UGA-3000 produces incremental cash flows of $28,893.00 per year for 9 years and cost $125,394.00. The firms WACC is 8.86%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
PLEASE ROUND TO 2 DECIMAL PLACES
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