Econo-Cool air conditioners cost $300 to purchase, result in electricity bills of $150 per year, and last

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Question:

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 discount rate is 21%.

a. What are the equivalent annual costs of the Econo-Cool and Luxury Air models?

b. Which model is more cost-effective?

c. Now you remember that the inflation rate is expected to be 10% per year for the foreseeable future. Redo parts (a) and (b).

Econo-Cool air conditioners cost $300 to purchase, result in electricity