Question

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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: 500 watts per hr. 300 watts per hr. 700 HID watt hour consumption per fixture LED watt hour consumption per fixture Number of fixtures Lifetime investment cost in present value terms) to replace each HID fixture with LED Operating hours per day Operating days per year Metered utility rate per kilowatt-hour (kwh)* $500 10 300 $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. A 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

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ANS: (a) Lovestment cast for replacing 700 Astuces : $ 500] - Voge: Lifetime investment cost_to replace each HID fixture with LED is the only investment cost to replace 7oo fixtures. (6) energy Annuar wtility cost savings from employing the new Solution : $/667 Werking - Note: Annual Citility cost saving. (i) saving of walt hear in a year $(500-300) X10 X 300} : 600000 were there ("") converting the GOO KWH saving of walf hour in kwh : r600000/1000) (ii) Metered utility reate per KWH : $0.11 Hence, Total annual :$66 saving of Utility cost (600 0:11) Id Net present yalue of the proposal : $64.93) Wonwung Noke ; ($500) + 66 PVAF(87., 15 years) =($500) +166 X 80559479) - $500) + 564.93 - $64.93

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