Question

Suppose you are the physical plant manager for a new hotel with many light fixtures. You need to decide if you should use 15-watt compact fluorescents or 60-watt incandescent, each giving an equivalent amount of lumens of light. The compact fluorescents cost $4.49 and last 8 years, while the incandescents cost $0.50 and last 1 year (thus have to be bought 8 times). However, the compact fluorescents save $4.96 per year in electricity costs. (This assumes that electricity costs 11 cents/kWh, lighting is used 2.75 hours per day x 365 days x 45watt savings.) Which light bulb should you use? Make the calculation using two different discount rates: 3% or 6%. You can use the Excel chart below to start your work. Print your results.

Cash Outlay for Investing in Lighting
			Year
Option	0	1	2	3	4	5	6	7	8
A. Compact fluorescents	-$4.49
B. Incandescents	-$0.50	-$0.50	-$0.50	-$0.50	-$0.50	-$0.50	-$0.50	-$0.50
Electricity Savings from compact fluorescents		$4.96	$4.96	$4.96	$4.96	$4.96	$4.96	$4.96	$4.96
PV Savings w/ discount rate
3.00%	?	?	?	?	?	?	?	?	?
6.00%	?	?	?	?	?	?	?	?	?