Question

An​ old, heavily used warehouse currently has an incandescent lighting system. The lights run essentially 24​ hr/day, 365​ days/yr and draw about 8kW of power. Consideration is being given to replacing these lights with fluorescent lights to save on electricity. It is estimated that the same level of lighting can be achieved with 4.3kW of fluorescent lights. Replacement of the lights will cost about ​$7000. Bulb replacement and other maintenance are not expected to be significantly different. Electricity for the lights currently costs ​$0.043​/kWh. The warehouse is scheduled for demolition in six years to make way for a more modern facility. The company has a MARR of 12%. Should the company replace the incandescent lights with fluorescent​ lights? Assume zero salvage value for both alternatives.

The PW for the incandescent lighting system is $_______. ​(Round to the nearest​ dollar.)

The PW for the fluorescent lighting system is $________. (Round to the nearest​ dollar.)

The company (should not/should) replace the incandescent lights with fluorescent lights.

Answer 1

MARR = 12%

t = 6 yrs

The annual cost of running incandescent bulbs = 24*365*8*0.043 = 3013.44

PW of running incandescent bulbs = -3013.44 * (P/A,12%,6) = -3013.44*4.111407

= -12389.48 = -12389 (round to nearest dollar)

The annual cost of running fluorescent bulbs = 24*365*4.3*0.043 = 1619.724

investment in bulbs = 7000

PW of running fluorescent bulbs = -7000 -1619.724*(P/A,12%,6)

= -7000 -1619.724*4.111407

= -13659.34 = -13659 (round to nearest dollar)

As present cost of incandescent bulbs is lower, bulbs should not be replaced