Question
In: Finance
25. please answer all questions round to 4 decimal places A firm is considering replacing the...
25. please answer all questions round to 4 decimal
places
A firm is considering replacing the existing industrial air
conditioning unit. They will pick one of two units. The first, the
AC360, costs $26,455.00 to install, $5,130.00 to operate per year
for 7 years at which time it will be sold for $6,941.00. The
second, RayCool 8, costs $41,330.00 to install, $2,082.00 to
operate per year for 5 years at which time it will be sold for
$8,917.00. The firm’s cost of capital is 6.16%. What is the
equivalent annual cost of the AC360? Assume that there are no
taxes.
A firm is considering replacing the existing industrial air
conditioning unit. They will pick one of two units. The first, the
AC360, costs $26,548.00 to install, $5,135.00 to operate per year
for 7 years at which time it will be sold for $6,971.00. The
second, RayCool 8, costs $41,800.00 to install, $2,115.00 to
operate per year for 5 years at which time it will be sold for
$9,029.00. The firm’s cost of capital is 5.06%. What is the
equivalent annual cost of the RayCool8? Assume that there are no
taxes.
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 $25,232.00 per year for 8 years
and costs $104,695.00. The UGA-3000 produces incremental cash flows
of $27,599.00 per year for 9 years and cost $126,254.00. The firm’s
WACC is 9.79%. What is the equivalent annual annuity of the
GSU-3300? Assume that there are no taxes.
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 $25,825.00 per year for 8 years
and costs $103,756.00. The UGA-3000 produces incremental cash flows
of $27,104.00 per year for 9 years and cost $126,558.00. The firm’s
WACC is 9.57%. What is the equivalent annual annuity of the
UGA-3000? Assume that there are no taxes.
Solutions
Expert Solution
1:
| EAC | $9,073.1115 |
| Year | AC360 | RayCool8 |
| 0 | -26455 | -41330 |
| 1 | -5130 | -2082 |
| 2 | -5130 | -2082 |
| 3 | -5130 | -2082 |
| 4 | -5130 | -2082 |
| 5 | -5130 | 6835 |
| 6 | -5130 | |
| 7 | 1811 | |
| NPV | ($50,362.79) | ($43,448.86) |
| EAC | $9,073.11 |
2: EAC =
| $10,153.7011 |
| Year | RayCool8 |
| 0 | -41800 |
| 1 | -2115 |
| 2 | -2115 |
| 3 | -2115 |
| 4 | -2115 |
| 5 | 6914 |
| NPV | ($43,887.40) |
| EAC | $10,153.70 |
Q3:
| EAA | ($5,757.3275) |
| Q3 | |
| Year | GSU 3300 |
| 0 | -104695 |
| 1 | 25232 |
| 2 | 25232 |
| 3 | 25232 |
| 4 | 25232 |
| 5 | 25232 |
| 6 | 25232 |
| 7 | 25232 |
| 8 | 25232 |
| NPV | $30,951.14 |
| EAA | ($5,757.33) |
Q4:
| EAA | ($5,502.6034) |
| Year | UGA-3000 |
| 0 | -126558 |
| 1 | 27104 |
| 2 | 27104 |
| 3 | 27104 |
| 4 | 27104 |
| 5 | 27104 |
| 6 | 27104 |
| 7 | 27104 |
| 8 | 27104 |
| 9 | 27104 |
| NPV | $32,238.59 |
| EAA | ($5,502.60) |
Workings
jeff jeffy answered 5 months agoRelated Solutions
25. please answer all questions round to 4 decimal places A firm is considering replacing the...
25. please answer all questions round to 4 decimal places
A firm is considering replacing the existing industrial air
conditioning unit. They will pick one of two units. The first, the
AC360, costs $26,455.00 to install, $5,130.00 to operate per year
for 7 years at which time it will be sold for $6,941.00. The
second, RayCool 8, costs $41,330.00 to install, $2,082.00 to
operate per year for 5 years at which time it will be sold for
$8,917.00. The firm’s...
25. please answer all questions round to 4 decimal places A firm is considering replacing the...
25. please answer all questions round to 4 decimal places
A firm is considering replacing the existing industrial air
conditioning unit. They will pick one of two units. The first, the
AC360, costs $26,455.00 to install, $5,130.00 to operate per year
for 7 years at which time it will be sold for $6,941.00. The
second, RayCool 8, costs $41,330.00 to install, $2,082.00 to
operate per year for 5 years at which time it will be sold for
$8,917.00. The firm’s...
25. please answer all questions round to 4 decimal places A firm is considering replacing the...
25. please answer all questions round to 4 decimal places
A firm is considering replacing the existing industrial air
conditioning unit. They will pick one of two units. The first, the
AC360, costs $26,455.00 to install, $5,130.00 to operate per year
for 7 years at which time it will be sold for $6,941.00. The
second, RayCool 8, costs $41,330.00 to install, $2,082.00 to
operate per year for 5 years at which time it will be sold for
$8,917.00. The firm’s...
25. please answer all questions round to 4 decimal places A firm is considering replacing the...
25. please answer all questions round to 4 decimal
places
A firm is considering replacing the existing industrial air
conditioning unit. They will pick one of two units. The first, the
AC360, costs $26,455.00 to install, $5,130.00 to operate per year
for 7 years at which time it will be sold for $6,941.00. The
second, RayCool 8, costs $41,330.00 to install, $2,082.00 to
operate per year for 5 years at which time it will be sold for
$8,917.00. The firm’s...
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