Econo-Cool air conditioners cost $300 to purchase, result in electricity bills of $150 per year, and last for 5 years. Luxury Air models cost $500, result in electricity bills of $100 per year, and last for 8 years. The discount rate is 21%.

 
a. What are the equivalent annual costs of the Econo-Cool and Luxury Air models?

 
b. Which model is more cost-effective?

 
c. Now you remember that the inflation rate is expected to be 10% per year for the foreseeable future. Redo parts (a) and (b).

 

$ 300 150 per year Econo-Cool air conditioners cost Electricity bills (Econo) Time (Econo) Luxury Air models cost Electricity bills (Luxury) Time (Luxury) 5.00 years $ 500 $ 100 per year 8.00 years Discount Rate 21.00% Inflation Rate 10.00%