Econo-Cool air conditioners cost $1,400 to purchase, result in electricity bills of $700 per year, and last for 6 years. Luxury Air models cost $1,600, result in electricity bills of $230 per year, and last for 9 years. The discount rate is 21%.

a.What are the equivalent annual costs of the Econo-Cool and Luxury Air models? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Econo-cool costs $1,400 and lasts for 6 years. The annual rental fee with the same PV is $_____________ The equivalent annual cost of owning and running Econo-cool is $ ____________ Luxury Air costs $1,600, and lasts for 9 years. Its equivalent annual rental fee is found as $ ____________ The equivalent annual cost of owning and running Luxury Air is $ _____________

b. Which model is more cost-effective? Econo-cool

Luxury Air

c-1.Now you remember that the inflation rate is expected to be 10% per year for the foreseeable future. What are the equivalent annual costs of the Econo-Cool and Luxury Air models? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Equivalent annual real cost to own Econo-cool $___________ Plus $700 (real operating cost) 700.00 $ _________ Equivalent annual real cost to own Luxury Air $_________ Plus $230 (real operating cost) 230.00 $___________

c-2. Which model is more cost-effective?

Econo-cooL Luxury Air