Question

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.

Answer 1

2nd and 3rd question given are same

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