A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,952.00 to install, $5,185.00 to operate per year for 7 years at which time it will be sold for $6,846.00. The second, RayCool 8, costs $41,608.00 to install, $2,102.00 to operate per year for 5 years at which time it will be sold for $8,928.00. The firm’s cost of capital is 5.72%. What is the equivalent annual cost of the AC360? Assume that there are no taxes. Answer format: Currency: Round to: 2 decimal places.

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,952.00 to install, $5,185.00 to operate per year for 7 years at which time it will be sold for $6,846.00. The second, RayCool 8, costs $41,608.00 to install, $2,102.00 to operate per year for 5 years at which time it will be sold for $8,928.00. The firm’s cost of capital is 5.72%. What is the equivalent annual cost of the AC360? Assume that there are no taxes. Answer format: Currency: Round to: 2 decimal places.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 13P

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