Low-energy lightbulbs typically cost $4.30, have a life of nine years, and use about $2.40 of electricity a year. Conventional lightbulbs are cheaper to buy, for they cost only $.66. On the other hand, they last only about a year and use about $7.40 of energy.
a. If the real discount rate is 5%, what is the equivalent annual cost of the two products? (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.)
Equivalent Annual Cost
Low-energy lightbulbs $
Conventional lightbulbs $
b. Which product is cheaper to use?
Low-energy lightbulbs
Conventional lightbulbs