Compact fluorescent lamps (CFLs) have become more popular in recent years, but d

Question

Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.39 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.10 and lasts for 12,000 hours. A kilowatt hour of electricity costs $0.115, which is about the national average. A kilowatt-hour is 1,000 watts for 1 hour. However, electricity costs actually vary quite a bit depending on location and user type. An industrial user in West Virginia might pay $0.04 per kilowatt-hour whereas a residential user in Hawaii might pay $0.25.

You require a return of 11 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour?

Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.39 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.10 and lasts for 12,000 hours. A kilowatt hour of electricity costs $0.115, which is about the national average. A kilowatt-hour is 1,000 watts for 1 hour. However, electricity costs actually vary quite a bit depending on location and user type. An industrial user in West Virginia might pay $0.04 per kilowatt-hour whereas a residential user in Hawaii might pay $0.25.

Explanation / Answer

Break even cost Per Kilowatt Hour = Contribution /Fixed cost Break even Point for Industrial User Cost of Electicity $       0.04 Fixed cost Rate Life Incandecent light Bulb(ILB) $0.39 1000 hrs CFL $3.10 12000 Hrs Break even point for ILB 0.04/(0.39/2) Break even point for ILB $    0.205 Break even point for CFL 0.04/3.10/24 Break even point for CFL $       0.31 Break even Point for Residential User Cost of Electicity $0.25 Fixed cost Rate Life Incandecent light Bulb(ILB) $0.39 1000 hrs CFL $3.10 12000 Hrs Break even point for ILB 0.25/(0.39/2) Break even point for ILB $    1.282 Break even point for CFL 0.25/3.10/24 Break even point for CFL $       1.94

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