Question

Compact fluorescent lamps (CFL) have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbuld costs $.45 and lasts for 1,000 hours. A 15-Watt CFL, which provides the same light cast $3.40 and lasts for 12,000 hours. A kilowatt-hour of electricity costs $ .121, which is about the national average. A Kilowatt-hour is 1,000 watts for 1 hour. If you require a 10 percent return and use a light fixture 500 hours per year, what is the equivalent annual cost of each lightbuld?

Answer 1

A 500 hours of per year use of CFL cost:

500 hrs per year * 15 watts per hour
= 7500 watts/1000 = 7.5 kwh per year
= 7.5 kwh * $0.121 = $0.9075 per year
CFL lasts for years : 12,000hrs / 500 hrs use per year = 24 years
Annuity Factor: (1 - (1 / 1.10^24)) / 0.10] = 8.985
EAC = (cost of cfl / annuity factor) + annual cost
= (3.40/8.985) + 0.9075
= 0.3796 +0.9075
= $1.2871

Incandescent bulb:
500 hrs per year * 60 watts per hour
= 30,000 watts/1000 = 30kwh
= 30kwh * $0.121 = $3.63 per year
Life of bulb in years= 1000hrs/ 500 hrs used per year = 2 years
Annuity factor: (1 - (1 / 1.10^2)) / 0.10
= 1.7355
EAC of bulb: (0.45 / 1.7355) + 3.63
= 0.25928 + 3.63
= $3.8892