Question:

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$-1.$ 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?

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

All input values are shown in yellow. Only these values need changed to review algo versions.

Answers are displayed in red.

Assumptions and other problem notes are displayed at the very bottom.

Input variables:

Econo$-$Cool cost

Econo$-$Cool annual electricity

Econo$-$Cool life in years

Luxury Air cost

Luxury Air annual electricity

Luxury Air life in years

Discount rate

c$-1.$ Inflation rate