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 $.55 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.90 and lasts for 12,000 hours. 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 $.04 per kilowatt-hour whereas a residential user in Hawaii might pay $.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?