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Determine the investment cost for replacing the fixtures

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Reference no: EM132719323

Problem - Den-Tex Company is evaluating a proposal to replace its HID (high intensity discharge) lighting with LED (light emitting diode) lighting throughout its warehouse. LED lighting consumes less power and lasts longer than HID lighting for similar performance. The following information was developed:

HID watt hour consumption per fixture 500 watts per hr.

LED watt hour consumption per fixture 300 watts per hr.

Number of fixtures 700

Lifetime investment cost (in present value terms) to replace each HID fixture with LED $500

Operating hours per day 10

Operating days per year 300

Metered utility rate per kilowatt-hour (kwh)* $0.11

*Note: A kilowatt-hour is equal to 1,000 watts per hour.

Required -

a. Determine the investment cost for replacing the 700 fixtures.

b. Determine the annual utility cost savings from employing the new energy solution.

c. Should the proposal be accepted? Evaluate the proposal using net present value, assuming a 15-year life and 8% minimum rate of return.

Reference no: EM132719323

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