Question
In: Finance
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 $26,388.00 to install, $5,005.00 to operate per year for 7 years at which time it will be sold for $7,074.00. The second, RayCool 8, costs $41,921.00 to install, $2,139.00 to operate per year for 5 years at which time it will be sold for $9,087.00. The firm’s cost of capital is 6.16%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
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Expert Solution
Solution :
The Equivalent Annual Cost of RayCool 8 = - $ 10,527.39
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
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