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Econo-Cool si conditioners cost $320 to purchase.resheetriebes of $150 per year and test for 5 years, Luxury Armodels cost $5

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Equivalent annual cost (EAC) helps in decision making by computing price of an asset to an equivalent annual amount. We can compare cost effectiveness of the two with different life span as follow

Equivalent Annual last = - Discountate to Annual link Asses Price X - - leniod will .. (1-(lt Discount sate)

Determine the price of the Ascet. Econo_Cool Air loss $220 kuxury air model cost $520 @ Expected Life span for each is rono c

b) EAC for Luxury Air Model. = $520x 0.25 +8 108 (1-(17.25, 8 =$520x 0.25 + $ 108 (I- = $520x 0.25 +$ 10B (4.95715.957) =145

- d) At 10% Inflakon date Econo: tool Air is worth in Syears 1 x $293 (( H10%) 0-6206 X $ 273 : $ 169 At 10% Lux way inflaton

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