Question

Low-energy light bulbs typically cost $3.60, have a life of 9 years, and currently use $2.00 of electricity per

year.  Conventional light bulbs are cheaper to buy, as they cost on $0.60.  But, they last 1 year and currently use $7.00 of electricity per year.  If the real discount rate is 4%, which light bulb is cheaper to use assuming a burnt-out bulb is replaced by an identical bulb?

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