A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,109.00 to install, $5,018.00 to operate per year for 7 years at which time it will be sold for $7,104.00. The second, RayCool 8, costs $41,629.00 to install, $2,182.00 to operate per year for 5 years at which time it will be sold for $8,980.00. The firm’s cost of capital is 5.54%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
Answer format: Currency: Round to: 2 decimal places.
Present value of costs of AC 360 = $ 49714.62593
The present value interest factor of annuity is calculated as follows
Present value interest factor of annuity = 5.67481777
Equivalent annual cost of the AC360 = $ 8760.57
Get Answers For Free
Most questions answered within 1 hours.