A plant engineer wishes to know which of two types of light bulbs should be used

Question

A plant engineer wishes to know which of two types of light bulbs should be used to light a warehouse. The bulbs currently used cost $45.00 per bulb and last 14,600 hours before burning out. A new type of bulb provides the same amount of light and consumes the same amount of energy but lasts twice as long. The labor cost to replace a bulb is $16.00. The lights are on 19 hrs/day, 365 days/yr. MARR=15%. What is the maximum price per new bulb below which the engineer should switch to the new bulb. (Break even price) (choose the closest to correct answer) Explean your answer with steps. $89 isn't the correct answer

1.

$96

2.

$93

3.

$89

4.

$72

5.

$98

6.

$118

7.

$101

1.

$96

2.

$93

3.

$89

4.

$72

5.

$98

6.

$118

7.

$101

Explanation / Answer

Suppose, we buy 2 bulbs worth 45 today and the other woths 'C'

The extra amount the bulb of 45 dollars will cost is in the end of 2.1053 years.

So you need to keep $ 16 today to replace the bulb.

The $ 16 compounded for 4.2106 years = 16 x (1.15)^4.2106 = $ 28.8

So, $ 90 + $ 28.8 = $118.8 is the maximum value of C.

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