Equivalent Annual Annuity. 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.