A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,475.00 to install, $5,140.00 to operate per year for 7 years at which time it will be sold for $6,878.00 The second, RayCool 8, costs $41,968.00 to install, $2,192.00 to operate per year for 5 years at which time it will be sold for $8,933.00. The firm's cost of capital is 6.63%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes
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The installation cost is $41,968.00. Since it is a one-time cost, we don't need to consider the time value of money. Therefore, the present value of the installation cost is also $41,968.00. Show more…
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