A computer call center is going to replace all of its incandescent lamps with more energy-efficient fluorescent lighting fixtures. The total energy saving are estimated to be $2,033 per year, and the cost of purchasing and installing the fluorescent fixtures is $5,400. The study period is five years, and terminal market values for the fixtures are negligible. a. What is the IRR of this investment? b. What is the simple payback period of the investment? c. Is there a conflict in the answers Parts (a) and (b)? List your assumptions. d. The simple payback "rate of return" is 1/θ. How close does this metric come to matching your answer in Part(a)?

A computer call center is going to replace all of its incandescent lamps with more energy-efficient fluorescent lighting fixtures. The total energy saving are estimated to be $2,033 per year, and the cost of purchasing and installing the fluorescent fixtures is $5,400. The study period is five years, and terminal market values for the fixtures are negligible. a. What is the IRR of this investment? b. What is the simple payback period of the investment? c. Is there a conflict in the answers Parts (a) and (b)? List your assumptions. d. The simple payback "rate of return" is 1/θ. How close does this metric come to matching your answer in Part(a)?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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