Low-energy lightbulbs typically cost $3.75, have a life of nineyears, and use about $1.85 of electricity a year. Conventionallightbulbs are cheaper to buy, for they cost only $.55. On theother hand, they last only about a year and use about $6.85 ofenergy.
a. If the real discount rate is 6%, what is theequivalent annual cost of the two products? (Do not roundintermediate calculations. Enter your answers as a positive valuerounded to 2 decimal places.)
| Equivalent Annual Cost |
Low-energy lightbulbs | $ |
Conventional lightbulbs | $ |
|
b. Which product is cheaper to use?
| Low-energy lightbulbs |
| Conventional lightbulbs |
