"A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,269.00 to install, $5,048.00 to operate per year for 7 years at which time it will be sold for $6,822.00. The second, RayCool 8, costs $41,557.00 to install, $2,036.00 to operate per year for 5 years at which time it will be sold for $9,051.00. The firm’s cost of capital is 5.47%. What is the equivalent annual cost of the AC360?"
2 decimal places.
AC360 | ||||||||
Discount rate | 0.0547 | |||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
Cash flow stream | -26269 | -5048 | -5048 | -5048 | -5048 | -5048 | -5048 | 1774 |
Discounting factor | 1 | 1.0547 | 1.112392 | 1.17324 | 1.2374162 | 1.305103 | 1.376492 | 1.451786 |
Discounted cash flows project | -26269 | -4786.2 | -4537.97 | -4302.62 | -4079.468 | -3867.89 | -3667.29 | 1221.943 |
NPV = Sum of discounted cash flows | ||||||||
NPV AC360 = | -50288.49 | |||||||
Where | ||||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||||
Discounted Cashflow= | Cash flow stream/discounting factor | |||||||
Equvalent annuity(EAA)= | -8839.46 | |||||||
Required rate = | 0.0547 | |||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
Cash flow stream | 0 | -8839.46 | -8839.46 | -8839.46 | -8839.46 | -8839.46 | -8839.46 | -8839.46 |
Discounting factor | 1 | 1.0547 | 1.112392 | 1.17324 | 1.2374162 | 1.305103 | 1.376492 | 1.451786 |
Discounted cash flows project | 0 | -8381.02 | -7946.35 | -7534.23 | -7143.482 | -6773 | -6421.73 | -6088.68 |
Sum of discounted future cashflows = | -50288.49 | |||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||||
Discounted Cashflow= | Cash flow stream/discounting factor |
"A firm is considering replacing the existing industrial air conditioning unit. They will pick one of...
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...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,474.00 to install, $5,159.00 to operate per year for 7 years at which time it will be sold for $7,133.00. The second, RayCool 8, costs $41,249.00 to install, $2,163.00 to operate per year for 5 years at which time it will be sold for $9,083.00. The firm’s cost of capital is 5.61%. What is the equivalent annual...
"A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,060.00 to install, $5,193.00 to operate per year for 7 years at which time it will be sold for $7,126.00. The second, RayCool 8, costs $41,530.00 to install, $2,020.00 to operate per year for 5 years at which time it will be sold for $8,934.00. The firm’s cost of capital is 5.45%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,432.00 to install, $5,106.00 to operate per year for 7 years at which time it will be sold for $6,874.00. The second, RayCool 8, costs $41,163.00 to install, $2,126.00 to operate per year for 5 years at which time it will be sold for $9,063.00. The firm’s cost of capital is 6.54%. What is the equivalent annual...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,573.00 to install, $5,105.00 to operate per year for 7 years at which time it will be sold for $6,917.00. The second, RayCool 8, costs $41,366.00 to install, $2,116.00 to operate per year for 5 years at which time it will be sold for $8,920.00. The firm’s cost of capital is 5.79%. What is the equivalent annual...
"A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,657.00 to install, $5,196.00 to operate per year for 7 years at which time it will be sold for $6,821.00. The second, RayCool 8, costs $41,605.00 to install, $2,132.00 to operate per year for 5 years at which time it will be sold for $8,996.00. The firm’s cost of capital is 6.53%. What is the equivalent annual...
unanswered A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,641.00 to install, $5,038.00 to operate per year for 7 years at which time it will be sold for $7,020.00. The second, RayCool 8, costs $41,431.00 to install, $2,030.00 to operate per year for 5 years at which time it will be sold for $8,945.00. The firm's cost of capital is 5.09%. What is the equivalent...
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,686.00 to install, $5,170.00 to operate per year for 7 years at which time it will be sold for $6,850.00 The second, RayCool 8, costs $41,298.00 to install, $2,163.00 to operate per year for 5 years at which time it will be sold for $9,075.00. The firm's cost of capital is 6.85%. What is the equivalent annual...
1. A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,081.00 to install, $5,081.00 to operate per year for 7 years at which time it will be sold for $7,075.00. The second, RayCool 8, costs $41,244.00 to install, $2,161.00 to operate per year for 5 years at which time it will be sold for $9,015.00. The firm’s cost of capital is 6.92%. What is the equivalent...
N2 A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,464.00 to install, $5,028.00 to operate per year for 7 years at which time it will be sold for $6,983.00. The second, RayCool 8, costs $41,667.00 to install, $2,083.00 to operate per year for 5 years at which time it will be sold for $9,080.00. The firm's cost of capital is 5.43%. What is the equivalent...