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GRIFFY INC. is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first costs $25,000 to install, $5,000 to operate per year for 5 years at which time it will be sold for $7,000. The second costs $40,000 to install, $2,000 to operate per year for 7 years at which time it will be sold for $9,000. The firm's cost of capital is 5%. What is the equivalent annual cost of the best project?

a. $8,093.19

b. $9,507.55

c. $10,068.22

d. $9,693.14

e. $7,807.41

Basic Finance, Finance

  • Category:- Basic Finance
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