Question

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,024.00 to install, $5,105.00 to operate per year for 7 years at which time it will be sold for $7,161.00. The second, RayCool 8, costs $41,708.00 to install, $2,083.00 to operate per year for 5 years at which time it will be sold for $8,978.00. The firm’s cost of capital is 5.23%. What is the equivalent annual cost of the AC360?

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Answer format: Currency: Round to: 2 decimal places.

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#2

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,500.00 to install, $5,117.00 to operate per year for 7 years at which time it will be sold for $6,875.00. The second, RayCool 8, costs $41,210.00 to install, $2,093.00 to operate per year for 5 years at which time it will be sold for $9,096.00. The firm’s cost of capital is 6.16%. What is the equivalent annual cost of the RayCool8?

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Answer format: Currency: Round to: 2 decimal places.

Answer 1

AC360
Discount rate	0.0523
Year	0	1	2	3	4	5	6	7
Cash flow stream	-26024	-5105	-5105	-5105	-5105	-5105	-5105	2056
Discounting factor	1	1.0523	1.107335	1.165249	1.2261914	1.290321	1.357805	1.428818
Discounted cash flows project	-26024	-4851.28	-4610.17	-4381.04	-4163.298	-3956.38	-3759.74	1438.951
NPV = Sum of discounted cash flows
NPV AC360 =	-50306.95
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
Equvalent annuity(EAA)=	-8766.65
Required rate =	0.0523
Year	0	1	2	3	4	5	6	7
Cash flow stream	0	-8766.64	-8766.64	-8766.64	-8766.645	-8766.64	-8766.64	-8766.64
Discounting factor	1	1.0523	1.107335	1.165249	1.2261914	1.290321	1.357805	1.428818
Discounted cash flows project	0	-8330.94	-7916.88	-7523.41	-7149.491	-6794.16	-6456.48	-6135.59
Sum of discounted future cashflows =	-50306.95
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Please ask remaining parts seperately, questions are unrelated