Question

Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $0.45 and lasts 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.40 and lasts for 12,000 hours. A kilowatt-hour of electricity costs $0.121, 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 light bulb?

Answer 1

The equivalent annual cost of the incandescent bulb is $7.27 while the equivalent annual cost of the CFL is $4.17, demonstrating that CFLs make more financial sense.

Step-by-step explanation:

The equivalent annual cost of each light bulb can be calculated by considering the initial cost, operating cost, and the cost of return on investment. For the incandescent bulb, the total cost is the sum of the initial cost and the operating cost over the 1,000-hour lifetime. The total cost for the CFL is the sum of the initial cost and the operating cost over the 12,000-hour lifetime. The operating cost can be calculated by multiplying the electricity cost per kilowatt-hour by the wattage of the bulb and the number of hours used per year.

For the incandescent bulb, the total cost is $0.45 (initial cost) + ($0.121/kWh * 60W * 500 hours/year) = $7.27. For the CFL, the total cost is $3.40 (initial cost) + ($0.121/kWh * 15W * 500 hours/year) = $4.17.

Therefore, the equivalent annual cost of the incandescent bulb is $7.27 and the equivalent annual cost of the CFL is $4.17.