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Econo-Cool air conditioners cost $335 to purchase, result in electricity bills of $157 per year, and last for 5 years. Luxury Air models cost $535,
Econo-Cool air conditioners cost $335 to purchase, result in electricity bills of $157 per year, and last for 5 years. Luxury Air models cost $535, result in electricity bills of $114 per year, and last for 8 years. The discount rate is 22%.
a. What is the equivalent annual cost of the Econo-Cool model and the Luxury Air model?
b. 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?
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