Allen corporation has to decide between following two air, Ask an Expert

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Allen Corporation has to decide between following two air conditioning units for the office building. Both units are adequate in their performance.

	Carrier	Worthington
Initial cost	$120,000	$80,000
Annual maintenance cost	$10,000	$12,000
Annual Electricity cost	$20,000	$25,000
Expected life	6 years	5 years

The company will employ straight line depreciation, with no resale value. The tax rate of Allen is 28%, and proper discount rate is 10%. Which one of these units will prove to be less costly in long run?

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