Question
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,548.00 to
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,548.00 to install, $5,158.00 to operate per year for 7 years at which time it will be sold for $7,072.00. The second, RayCool 8, costs $41,366.00 to install, $2,059.00 to operate per year for 5 years at which time it will be sold for $9,069.00. The firms cost of capital is 6.59%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,555.00 to install, $5,187.00 to operate per year for 7 years at which time it will be sold for $7,074.00. The second, RayCool 8, costs $41,492.00 to install, $2,078.00 to operate per year for 5 years at which time it will be sold for $8,917.00. The firms cost of capital is 6.17%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
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