The NYU Stern Office of Energy Planning and Management and the Environmental Concerns Organization are pleased to announce a special sales promotion of energy efficient light bulbs in celebration of Earth Day. General Electric compact fluorescent light bulbs will be sold at the Universitys cost of $10 each (including tax). This purchase can be coupled with a $5 mail-in rebate resulting in a net cost per bulb of $5. All members of the University community are invited to participate in the sale. Compact fluorescent bulbs use one-fourth the energy of regular light bulbs and last 10 times longer. Over its life a compact fluorescent bulb can save your household $50 in electricity cost. Additional Information: Cost of a normal bulb = $.50. Electricity cost of running a normal light bulb: $0.0015 per hour. All electricity bills are paid at the the end of the year. Average Life of a normal light bulb: 750 hours. Standard Deviation of the life of a normal bulb: 200 hours Risk free Rate: 10% Inflation Rate: 0% Market Premium for Risk: 6%.

c) What is the hourly energy cost that makes you indifferent between buying a normal light bulb versus buying the energy efficient light bulb at $10 (WITHOUT the mail-in rebate)? Here its required that you answer the question qualitatively, that is, to answer the following question: should the hourly energy cost be higher or lower than the original $0.0015 to make the NPV in part a) equal to zero?