The Sandy Springs Condominium Association (the "Association") is a not-for-profit association set up to manage the condominium. Owners of condominium units elect the Board of Directors to make the Association's decisions on their behalf. The Association's Lighting Committee has presented a proposal to the Board of Directors. The Association's responsible for maintaining the street lights. All such lights are currently incandescent bulbs. The proposal is to remove all the existing incandescent flood lights and replace them with compact fluorescent ("CFL") flood lights. The CFL flood lights are more expensive to purchase than the incandescent flood lights have been, but the CFL flood lights would consume less electricity. Specifically, the data offered by the Lighting Committee is as follows:
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Type of Flood Light
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Purchase Cost
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Annual Electricity Usage
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Incandescent
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$1.25
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$25
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CFL
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$5.45
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$4
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CFLs last longer than incandescent bulbs, but, for this question, assume that both incandescent flood lights and CFL flood lights last an average of one year. The Lighting Committee has proposed that it replace all the incandescent flood lights with CFLs at once. Two of the Board members have objected that it would be wasteful to discard the incandescent flood lights that are currently installed, as they still have up to a year's life left in them before they would burn out. Suppose that you are a member of the Board of Directors.
Assume that the incandescent lights that would be replaced have no resale value, so they would be discarded if they were replaced. Would you vote to replace all the existing incandescent lights with CFL flood lights at once, or would you replace the incandescent flood lights over the next year as they burn out? Show your calculations of costs of the two alternatives, and explain the reasoning of your conclusion.