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Your firm spends $80,000 annually for electricity. Johnson Controls offers to install a new computer-controlled lighting system that will reduce electric bills by $9,000 in
Your firm spends $80,000 annually for electricity. Johnson Controls offers to install a new computer-controlled lighting system that will reduce electric bills by $9,000 in each of the next 3 years. Assume we know the cost reductions for certain and the interest rate is 3%. If the system costs $20,000 to install, is this a good investment? Afier computing the NPV of the project, please write one or two sentences to explain if you think this is a good investment and why. (Hint: compute the NPV of this project. Is it positive or negative? IMPORTANT: identify cash flows that are only relevant to this project.)
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