Ganon Inc. 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: Line Item Description Value HID watt hour consumption per fixture 500 watts per hr. LED watt hour consumption per fixture 300 watts per hr. Number of fixtures 800 Lifetime investment cost (in present value terms) to replace each HID fixture with LED $300 Operating hours per day 10 Operating days per year 300 Metered utility rate per kilowatt-hour (kwh)* $0.12 *Note: A kilowatt-hour is equal to 1,000 watts per hour. a. Determine the investment cost for replacing the 800 fixtures. fill in the blank 1 of 1$ b. Determine the annual utility cost savings from employing the new energy solution. fill in the blank 1 of 1$ c. Should the proposal be accepted? 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.)
Ganon Inc. 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: Line Item Description Value HID watt hour consumption per fixture 500 watts per hr. LED watt hour consumption per fixture 300 watts per hr. Number of fixtures 800 Lifetime investment cost (in present value terms) to replace each HID fixture with LED $300 Operating hours per day 10 Operating days per year 300 Metered utility rate per kilowatt-hour (kwh)* $0.12 *Note: A kilowatt-hour is equal to 1,000 watts per hour. a. Determine the investment cost for replacing the 800 fixtures. fill in the blank 1 of 1$ b. Determine the annual utility cost savings from employing the new energy solution. fill in the blank 1 of 1$ c. Should the proposal be accepted? 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.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Analyze a CSR capital investment proposal for Ganon Inc.
Ganon Inc. 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:
| Line Item Description | Value |
|---|---|
| HID watt hour consumption per fixture | 500 watts per hr. |
| LED watt hour consumption per fixture | 300 watts per hr. |
| Number of fixtures | 800 |
| Lifetime investment cost (in present value terms) to replace each HID fixture with LED |
$300 |
| Operating hours per day | 10 |
| Operating days per year | 300 |
| Metered utility rate per kilowatt-hour (kwh)* | $0.12 |
*Note: A kilowatt-hour is equal to 1,000 watts per hour.
a. Determine the investment cost for replacing the 800 fixtures.
fill in the blank 1 of 1$
b. Determine the annual utility cost savings from employing the new energy solution.
fill in the blank 1 of 1$
c. Should the proposal be accepted?
Evaluate the proposal using
fill in the blank 1 of 1$
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