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 $0.44 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.35 and lasts for 12,000 hours. A kilowatt hour of electricity costs $0.120, 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 9 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour? (Do not round intermediate calculations and round your final answer to 6 decimal places. (e.g., 32.161616)).

Break-even cost = ?

Explanation / Answer

Solution:

Number of watts used by the bulb per hour = W/1000

Kilowatt hours used per year = W/1000 x H

Electricity cost per year = W/1000 x H x C

NPV = -P – (W/1000 x H x C) (PVIFA @ 9%, n)

EAC of 1 st bulb =

[-$0.44 – (60/ 1000 x 500 x C) (PVIFA @ 9%, 2)]/PVIFA @ 9%, 2

                      = [-$0.44 – 52.7733C]/1.7591

EAC of 2nd

bulb = [-$3.35– (15/1000 x 500 x C) (PVIFA @ 9%, 24)]/PVIFA @ 9%, 24

                      = [-$3.35 – 72.7996C]/9.7066

[-$0.44 – 52.7733C]/1.7591 = [-$3.35 – 72.7996C]/9.7066

5.5179[-$0.44– 52.7733C] = [-$3.35 – 72.7996C]

-$2.4278 – 291.20C = -$3.35 – 72.7996C

     -218.4004C = -0.9222

C = $0.004225

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.