Question
In: Finance
Low-energy light bulbs cost $3.50, have a life of nine years, and use about $1.60 of...
Low-energy light bulbs cost $3.50, have a life of nine years, and use about $1.60 of electricity a year, paid at the end of each year.
The real discount rate is 5%, given as an effective annual rate. Assume that all cash flows are real. The inflation rate is 3% given as an effective annual rate.
Find the Equivalent Annual Cost (EAC) of the low-energy bulbs.
Solutions
Expert Solution
The answer is given below :
To calculate EAC - we will calculate the total Present value of the cash outflows and divide it by the sum of discounting factor, as calculated below :
jeff jeffy answered 1 year agoRelated Solutions
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