Question

In: Finance

1. A firm is considering replacing the existing industrial air conditioning unit. They will pick one...

1. A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,094.00 to install, $5,013.00 to operate per year for 7 years at which time it will be sold for $7,062.00. The second, RayCool 8, costs $41,265.00 to install, $2,091.00 to operate per year for 5 years at which time it will be sold for $8,963.00. The firm’s cost of capital is 6.87%. What is the equivalent annual cost of the AC360? Assume that there are no taxes. Round to: 2 decimal places.

2. A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $26,693.00 per year for 8 years and costs $104,104.00. The UGA-3000 produces incremental cash flows of $29,550.00 per year for 9 years and cost $126,908.00. The firm’s WACC is 9.97%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes. Currency: Round to: 2 decimal places.

3. A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $26,693.00 per year for 8 years and costs $104,104.00. The UGA-3000 produces incremental cash flows of $29,550.00 per year for 9 years and cost $126,908.00. The firm’s WACC is 9.97%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.Currency: Round to: 2 decimal places.

Solutions

Expert Solution

2nd and 3rd question given are same

Please upvote


Related Solutions

1.A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
1.A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,376.00 to install, $5,146.00 to operate per year for 7 years at which time it will be sold for $7,155.00. The second, RayCool 8, costs $41,333.00 to install, $2,023.00 to operate per year for 5 years at which time it will be sold for $8,968.00. The firm’s cost of capital is 6.46%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,454.00 to install, $5,152.00 to operate per year for 7 years at which time it will be sold for $7,182.00. The second, RayCool 8, costs $41,990.00 to install, $2,150.00 to operate per year for 5 years at which time it will be sold for $9,054.00. The firm’s cost of capital is 6.22%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,708.00 to install, $5,045.00 to operate per year for 7 years at which time it will be sold for $7,180.00. The second, RayCool 8, costs $41,711.00 to install, $2,042.00 to operate per year for 5 years at which time it will be sold for $9,069.00. The firm’s cost of capital is 5.34%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,774.00 to install, $5,198.00 to operate per year for 7 years at which time it will be sold for $6,919.00. The second, RayCool 8, costs $41,604.00 to install, $2,063.00 to operate per year for 5 years at which time it will be sold for $9,086.00. The firm’s cost of capital is 5.80%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,197.00 to install, $5,052.00 to operate per year for 7 years at which time it will be sold for $7,031.00. The second, RayCool 8, costs $41,616.00 to install, $2,035.00 to operate per year for 5 years at which time it will be sold for $8,941.00. The firm’s cost of capital is 6.43%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,468.00 to install, $5,014.00 to operate per year for 7 years at which time it will be sold for $7,062.00. The second, RayCool 8, costs $41,121.00 to install, $2,143.00 to operate per year for 5 years at which time it will be sold for $9,074.00. The firm’s cost of capital is 5.40%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,930.00 to install, $5,106.00 to operate per year for 7 years at which time it will be sold for $6,924.00. The second, RayCool 8, costs $41,240.00 to install, $2,200.00 to operate per year for 5 years at which time it will be sold for $9,047.00. The firm’s cost of capital is 5.28%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,225.00 to install, $5,116.00 to operate per year for 7 years at which time it will be sold for $7,059.00. The second, RayCool 8, costs $41,570.00 to install, $2,133.00 to operate per year for 5 years at which time it will be sold for $8,964.00. The firm’s cost of capital is 5.32%. What is the equivalent annual...
1. A) A firm is considering replacing the existing industrial air conditioning unit. They will pick...
1. A) A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,294.00 to install, $5,151.00 to operate per year for 7 years at which time it will be sold for $6,930.00. The second, RayCool 8, costs $41,464.00 to install, $2,183.00 to operate per year for 5 years at which time it will be sold for $8,907.00. The firm’s cost of capital is 5.33%. What is the...
1. Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a...
1. Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. The proposed machine will cost $120,000 and have installation costs of $20,000. It will be depreciated using a 3 year MACRS recovery schedule. It can be sold for $60,000 after three years of use (before tax; at the end of year 3). The existing machine was purchased two years ago for $95,000 (including installation). It is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT