Question

24 Light emitting diodes (LED) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.53 and lasts 1,000 hours. A 15-watt LED, which provides the same light, costs $3.80 and lasts for 12,000 hours. A kilowatt-hour of electricity costs $.129. A kilowatt-hour is 1,000 watts for 1 hour. If you require a return of 9 percent and use a light fixture 500 hours per year, what is the equivalent annual cost of each light bulb? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 10 points Skipped еВook Print 60-watt incandescent light bulb LED light bulb References

Answer 1

A B C 1 60-watt incandescent bulb 15-watt LED 2 One bulb cost Add: PV of electricity costs for 2 years Add: PV of electricity costs for 24 years Total present value of costs PVAIF(9%,2) PVAIF(9%,24) 0.53 3.8 4 6.81 9.39 6 7.34 13.19 7 1.759 8 9.707 9 4.17 $ Equivalent annual cost 10 1.36 11 st LO

Excel formula:

A В 1 60-watt incandescent bulb 15-watt LED 3.8 0.53 One bulb cost Add: PV of electricity costs for 2 years PV(9%1000/500,-(500*60/1000)*0.129) Add: PV of electricity costs for 24 years Total present value of costs PVAIF(9%,2) PVAIF(9%,24) 4 =PV(9%,12000/500,-(500*15/1000)*0.129)| =D3+D5 5 —С3+C4 6 1.759 7 9.707 8 9 -D6/D8 Equivalent annual cost |ЕC6/C7 10 11