Little Rhody Manufacturing needs to purchase a new central air-conditioning system for a plant. There are two choices. The first system costs $70,000 and is expected to last 6 years, and the second system costs $102,000 and is expected to last 9 years. Assume that the opportunity cost of capital is 12 percent. Which air-conditioning system should you purchase

The first option should be considered for purchase as its has a lesser EAC

Explanation:        

                                           Option 1          Option 2

Cost                                    $70,000           $102,000

Opportunity cost                     12%                    12%

of capital

Useful Life                             6 years             9 years

PVAF                                      4.114                 5.3282

Equated Annual Cost        $17,025.83       $19,143.43

Conclusion: The first option should be considered for purchase as its has a lesser EAC.

Working

PVAF (12%, 6 years) = 4.114

PVAF (12%, 9 years) = 5.3282

Equated annual cost = Cost / PVAF (r%, n years)

i believe that it is a 45% chance.

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

                                          hope it