QUESTION 3 Your dad made the following estimates as he considered upgrading the air-conditioning system in their home. Use AW analysis to determine the sensitivity of the economic decision to interest rates of 4%, 6%, and 8% per year. Is the decision sensitive to a change in interest rates within this range? System 1 2 First cost, $ -10,000 -17,000 Annual operating cost, $ -600 -150 Salvage (disposal) value, S -100 -300 New compressor and motor cost at midlife, S -1,750 -3,000 Life, years 12 O Yes O No

QUESTION 3 Your dad made the following estimates as he considered upgrading the air-conditioning system in their home. Use AW analysis to determine the sensitivity of the economic decision to interest rates of 4%, 6%, and 8% per year. Is the decision sensitive to a change in interest rates within this range? System 1 2 First cost, $ -10,000 -17,000 Annual operating cost, $ -600 -150 Salvage (disposal) value, S -100 -300 New compressor and motor cost at midlife, S -1,750 -3,000 Life, years 12 O Yes O No

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter2: Using Financial Statements And Budgets

Section: Chapter Questions

Problem 5FPE

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