A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,650.00 to install, $5,193.00 to operate per year for 7 years at which time it will be sold for $7,011.00. The second, RayCool 8, costs $41,900.00 to install, $2,021.00 to operate per year for 5 years at which time it will be sold for $9,090.00. The firm’s cost of capital is 6.42%. 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 $26,650.00 to install, $5,193.00 to operate per year for 7 years at which time it will be sold for $7,011.00. The second, RayCool 8, costs $41,900.00 to install, $2,021.00 to operate per year for 5 years at which time it will be sold for $9,090.00. The firm’s cost of capital is 6.42%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,650.00 to install, $5,193.00 to operate per year for 7 years at which time it will be sold for $7,011.00. The second, RayCool 8, costs $41,900.00 to install, $2,021.00 to operate per year for 5 years at which time it will be sold for $9,090.00. The firm’s cost of capital is 6.42%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
Answer format: Currency: Round to: 2 decimal places.
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