Question: Low - energy light bulbs cost $ 6 . 5 0 , have a life o f nine years, and use about $ 2 .

Low-energy light bulbs cost $6.50, have a life of nine years, and use about $2.00of electricity a year, paid at the end of each year.
The real discount rate is5%, given asan effective annual rate. Assume that all cash flows are real. The inflation rate is2% given asan effective annual rate.
Find the Equivalent Annual Cost (EAC)of the low-energy bulbs.

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