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IN EXCEL show all the excel formula Your firm spends $6,500 annually on electricity. Johnson Controls offers to install a new computer-controlled lighting system that
IN EXCEL
show all the excel formula
Your firm spends $6,500 annually on electricity. Johnson Controls offers to install a new computer-controlled lighting system that will reduce electric bills by $1,000 in each of the next 5 years. Assume the cost savings are known with certainty and the interest rate is 10%.
- If the system costs $1,450 to install and $2,750 to dispose of at the end of 5 years, what is the NPV of the project? Use the timeline method to solve this. (Hint: $6,500 is not relevant for the decision. You can completely ignore it)
- Should the firm install the new lighting system? Why?
- What are the IRRs of the project? There should be two IRRs even if one of them is not useful. (If you use some negative number as the second argument in the IRR function you will get a negative IRR.)
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