Econo-cool air conditioners cost 300 to purchase result in, Ask an Expert

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Econo-Cool air conditioners cost $300 to purchase, result in electricity bills of $150 per year, and last for 5 years. Luxury Air models cost $500, result in electricity bills of $100 per year, and last for 8 years. The (nominal) discount rate is 21%.

a. What are the equivalent annual costs of both models?

b. Which model is more cost effective?

c. Suppose the inflation rate is 10%. Redo parts a. and b. [Hint: Find the real rate.]

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Financial Management, Finance

Category:- Financial Management
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