The Biltmore Garage has lights in places that are difficult to reach. Management estimates that it costs about $2 to change a bulb. Standard 100-watt bulbs with an expected life of 1000 hours are now used. Standard bulbs cost $1. A long-life bulb that requres 90 watts for the same effective level of light is available. Long-life bulbs cost $3. The bulbs that are difficult to reach are in use for about 500 hours a month. Electricity costs $0.08/kilowatt-hour payable at the end of each month. Biltmore uses a 12% MARR (1% per month) for projects involving supplies.
a) What minimum life for the long-life bulb would make its cost lower?
b) If the cost of changing bulbs is ignored, what is the minimum life for the long-life bulb for them to have a lower cost?
c) If the solutions are obtained by linear interpolation of the capital recovery factor, will the approximations understate or overstate the required life?
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Linear interpolation of the capital recovery factor is emphasized.