Light emitting diode (LED) light bulbs have become required 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 LED, which provides the same light, costs $3.90 and lasts for 12,000 hours. A kilowatt-hour is 1,000 watts for 1 hour. Suppose you have a residence with a lot of incandescent bulbs that are used on average 500 hours a year. The average bulb will be about halfway through its life, so it will have 500 hours remaining (and you cant tell which bulbs are older or newer). If you require a return of 11 percent, at what cost per kilowatt-hour does it make sense to replace your incandescent bulbs today?

Break-even cost: