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:

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$)*$

$500$ watts per hr$.$

$300$ watts per hr$.$

$800$

$$300$

$10$

$300$

$$0\mathrm{.}12$

$*$Note: A kilowatt$-$hour is equal to $1,000$ watts per hour.

a$.$ Determine the investment cost for replacing the $800$ fixtures.

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b$.$ Determine the annual utility cost savings from employing the new energy solution.

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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.$)$ $M