A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,387.00 to install, $5,018.00 to operate per year for 7 years at which time it will be sold for $7,075.00. The second, RayCool 8, costs $41,041.00 to install, $2,091.00 to operate per year for 5 years at which time it will be sold for $9,042.00. The firm's cost of capital is 6.50%. 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 $26,387.00 to install, $5,018.00 to operate per year for 7 years at which time it will be sold for $7,075.00. The second, RayCool 8, costs $41,041.00 to install, $2,091.00 to operate per year for 5 years at which time it will be sold for $9,042.00. The firm's cost of capital is 6.50%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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