ps33 1

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,567.00 to install, $5,109.00 to operate per year for 7 years at which time it will be sold for $7,147.00. The second, RayCool 8, costs $41,254.00 to install, $2,042.00 to operate per year for 5 years at which time it will be sold for $9,081.00. The firms cost of capital is 6.09%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.