Question

# Compact fluorescent lamps (CFLs) have become required in recent years, but do they make financial sense?...

 Compact fluorescent lamps (CFLs) have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs \$.35 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs \$2.90 and lasts for 12,000 hours. A kilowatt-hour is 1,000 watts for 1 hour. Suppose you have a residence with a lot of incandescent bulbs that are used on average 500 hours a year. The average bulb will be about halfway through its life, so it will have 500 hours remaining (and you can’t tell which bulbs are older or newer).
 If you require a 9 percent return, at what cost per kilowatt-hour does it make sense to replace your incandescent bulbs today?

The CFL bulb wil last for 12000/500 = 24 years

so for equal comparison, from next year, every year one has to spend \$0.35 in addition to electricity cost (100 hours life / 500 use per year)

Now, let cost of each KwH be x

so on using incandecent bulb, we get electricity cost in a year = 60*500*x/1000 = 30x

For CFL bulb, we get, = 15*500*x/1000 = 7.5x

 Y0 Y1 Y2 Y3 Y4 Y24 Incandecent Bulb -30x -30x -30x -30x -30x -0.35 -0.35 (no need to buy at Y24) CFL Bulb -7.5x -7.5x -7.5x -7.5x -7.5x -2.9

Discounting all by 9% and bringing NPV to 0 at Y) gives,

x= \$0.006, so at 0.6 cents per KwH it makes sense to use CFL bulb

#### Earn Coins

Coins can be redeemed for fabulous gifts.