Question

Analyze a CSR Capital Investment Proposal for Den-Tex Company

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.

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?
Yes

Evaluate the proposal using net present value, assuming a 15-year life and 8% minimum rate of return. (Click here to view Present Value of Ordinary Annuity.)
$

Answer 1

Answer is given below