You have bids to install solar panels on your roof from two companies: SunCo and PowerPlus. SunCo requires an immediate installation cost of $19,750 as well as $610 per year in maintenance costs (the first maintence cost would occur in 1 year). SunCo's panels would last 18 years. PowerPlus requires an immediate installation cost of $21,500 as well as $685 per year in maintenance costs. PowerPlus' panels would last 20 years. What is the Equivalent Annual Cost (EAC) of the cheaper option (i.e. the one with the lower EAC) if the discount rate is 6.6%? The cheaper option has an EAC closest to: A. $2,423 B. $2,517 C. $2,840 D. $2,652

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You have bids to install solar panels on your roof from two companies: SunCo and PowerPlus. SunCo requires an
immediate installation cost of $19,750 as well as $610 per year in maintenance costs (the first maintence cost would
occur in 1 year). SunCo's panels would last 18 years. PowerPlus requires an immediate installation cost of $21,500
as well as $685 per year in maintenance costs. PowerPlus' panels would last 20 years. What is the Equivalent Annual
Cost (EAC) of the cheaper option (i.e. the one with the lower EAC) if the discount rate is 6.6%?
The cheaper option has an EAC closest to:
A. $2,423
B. $2,517
c. $2,840
D. $2,652
E. $2,715
Transcribed Image Text:You have bids to install solar panels on your roof from two companies: SunCo and PowerPlus. SunCo requires an immediate installation cost of $19,750 as well as $610 per year in maintenance costs (the first maintence cost would occur in 1 year). SunCo's panels would last 18 years. PowerPlus requires an immediate installation cost of $21,500 as well as $685 per year in maintenance costs. PowerPlus' panels would last 20 years. What is the Equivalent Annual Cost (EAC) of the cheaper option (i.e. the one with the lower EAC) if the discount rate is 6.6%? The cheaper option has an EAC closest to: A. $2,423 B. $2,517 c. $2,840 D. $2,652 E. $2,715
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