Econo-Cool air conditioners cost $315 to purchase, result in electricity bills of $153 per year, and last for 5 years. Luxury Air models cost $515, result in electricity bills of $106 per year, and last for 8 years. The discount rate is 23%.

a. What is the equivalent annual cost of the Econo-Cool model? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. What is the equivalent annual cost of the Luxury Air model? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

c. Which model is more cost-effective?

multiple choice 1

• Econo-Cool

• Luxury Air

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

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

multiple choice 2

• Econo-Cool

• Luxury Air