Compact fluorescent lamp for particular lighting application

Assignment Help Financial Management

Reference no: EM131889846

Your boss has asked you to evaluate the economics of replacing 1,000 60-Watt incandescent light bulbs (ILBs) with 1,000 compact fluorescent lamps (CFLs) for a particular lighting application. During your investigation you discover that 13-Watt CFLs costing $1.90 each will provide the same illumination as standard 60-Watt ILBs costing $0.50 each. Interestingly, CFLs last, on average, eight times as long as incandescent bulbs. The average life of an ILB is one year over the anticipated usage of 1,000 hours each year. Each incandescent bulb costs $2.10 to install/replace. Installation of a single CFL costs $3.00, and it will also be used 1,000 hours per year. Electricity costs $0.12 per kilowatt hour (kWh), and you decide to compare the two lighting options over an 8-year study period. If the MARR is 15% per year, compare the economics of the two alternatives and write a brief report of your findings for the boss. Assume that both installation cost and cost of the bulbs occur at the beginning of each year and that the electricity expense is incurred at the end of each year for eight years.

Reference no: EM131889846

Questions Cloud

Perpetuity starting with payments : A perpetuity starting with payments of $1000 per year in one year and increasing by $50/year i=6%

What is the geometric average and arithmetic average : A stock has the following returns over three consecutive years: -77%, -17%, and 69%. What is the arithmetic average? What is the geometric average?

Considering investment in one of two common stocks : Summerville is considering an investment in one of two common stocks. The expected rate of return for stock.

Two methods produce the same net operating income : what level of output will the two methods produce the same net operating income?

Compact fluorescent lamp for particular lighting application : evaluate the economics of replacing 1,000 60-Watt incandescent light bulbs (ILBs) with 1,000 compact fluorescent lamps for particular lighting application.

Dividend yield and capital gains yield for the stock. : calculate the dividend yield and capital gains yield for the stock.

Proposes to use it for expansion project : A company has a vacant building on its property that is completely depreciated and it proposes to use it for an expansion project.

What is the company cost of preferred stock : What is the company's cost of preferred stock for use in calculating the WACC??

Cost of new stock exceed the cost of retained earnings : Eakins Inc.'s common stock currently sells for $15.00 per share, By how much would the cost of new stock exceed the cost of retained earnings?

User Account

All Pages