A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,508.00 to install, $5,113.00 to operate per year for 7 years at which time it will be sold for $7,056.00. The second, RayCool 8, costs $41,424.00 to install, $2,136.00 to operate per year for 5 years at which time it will be sold for $8,919.00. The firms cost of capital is 6.52%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.

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#2

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,804.00 to install, $5,151.00 to operate per year for 7 years at which time it will be sold for $7,033.00. The second, RayCool 8, costs $41,610.00 to install, $2,011.00 to operate per year for 5 years at which time it will be sold for $9,008.00. The firms cost of capital is 6.20%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.

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#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 $24,882.00 per year for 8 years and costs $103,203.00. The UGA-3000 produces incremental cash flows of $27,305.00 per year for 9 years and cost $126,304.00. The firms WACC is 9.44%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

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#4

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 $25,568.00 per year for 8 years and costs $103,186.00. The UGA-3000 produces incremental cash flows of $27,400.00 per year for 9 years and cost $126,856.00. The firms WACC is 9.62%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.

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