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1.) A firm is considering replacing the existing industrial air conditioning unit. They will pick...

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Finance

1.) A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,505.00 to install, $5,027.00 to operate per year for 7 years at which time it will be sold for $7,148.00. The second, RayCool 8, costs $41,448.00 to install, $2,013.00 to operate per year for 5 years at which time it will be sold for $9,043.00. The firms cost of capital is 5.44%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.

2.) A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $26,676.00 per year for 8 years and costs $104,087.00. The UGA-3000 produces incremental cash flows of $28,484.00 per year for 9 years and cost $125,791.00. The firms WACC is 7.54%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

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