Which air-conditioning system should Cullumber purchase?Self-Study Problem 11.05

Cullumber Manufacturing, Inc., needs to purchase a new central air-conditioning system for a plant. There are two choices. The first system costs $87,000 and is expected to last 10 years, and the second system costs $96,000 and is expected to last 15 years. Assume that the opportunity cost of capital is 10 percent. (Round answers to 2 decimal places, e.g. 5,275.25.)

Equivalent Annual Cost for System 1=$

System 2= $

Which air-conditioning system should Cullumber purchase?

Cullumber should purchase the...:

a. Second System

b. First System