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 cost of the AC360? Assume that there are no taxes.

Solutions

Expert Solution

Solution :

The equivalent annual cost of the AC360 = - $ 8,990.05

= - $ 8,990 ( When rounded off to the nearest whole number )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 1 year ago

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