A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,187.00 to install, $5,054.00 to operate per year for 7 years at which time it will be sold for $7,139.00. The second, RayCool 8, costs $41,671.00 to install, $2,042.00 to operate per year for 5 years at which time it will be sold for $9,065.00. The firm’s cost of capital is 5.94%. What is the equivalent annual cost of the RayCool8? 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 $26,187.00 to install, $5,054.00 to operate per year for 7 years at which time it will be sold for $7,139.00. The second, RayCool 8, costs $41,671.00 to install, $2,042.00 to operate per year for 5 years at which time it will be sold for $9,065.00. The firm’s cost of capital is 5.94%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.

Name: A firm is considering replacing the existing industrial air conditioni
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Description: A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,187.00 to install, $5,054.00 to operate per year for 7 years at which time it will be sold for $7,139.00.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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