# 1. A firm is considering repla

1. A firm is considering replacing the existing industrial airconditioning unit. They will pick one of two units. The first, theAC360, costs $26,094.00 to install, $5,013.00 to operate per yearfor 7 years at which time it will be sold for $7,062.00. Thesecond, RayCool 8, costs $41,265.00 to install, $2,091.00 tooperate per year for 5 years at which time it will be sold for$8,963.00. The firm’s cost of capital is 6.87%. What is theequivalent annual cost of the AC360? Assume that there are notaxes. *Round to: 2 decimal places.*

2. A firm is must choose to buy the GSU-3300 or the UGA-3000.Both machines make the firm’s production process more efficientwhich in turn increases incremental cash flows. The GSU-3300produces incremental cash flows of $26,693.00 per year for 8 yearsand costs $104,104.00. The UGA-3000 produces incremental cash flowsof $29,550.00 per year for 9 years and cost $126,908.00. The firm’sWACC is 9.97%. What is the equivalent annual annuity of theGSU-3300? Assume that there are no taxes. *Currency: Round to: 2decimal places.*

3. A firm is must choose to buy the GSU-3300 or the UGA-3000.Both machines make the firm’s production process more efficientwhich in turn increases incremental cash flows. The GSU-3300produces incremental cash flows of $26,693.00 per year for 8 yearsand costs $104,104.00. The UGA-3000 produces incremental cash flowsof $29,550.00 per year for 9 years and cost $126,908.00. The firm’sWACC is 9.97%. What is the equivalent annual annuity of theGSU-3300? Assume that there are no taxes.*Currency: Round to: 2decimal places.*

Answer:

2nd and 3rd question given are same

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