![]() The unit cost formula felt like trying to catch a snitch while riding a broomstick upside down. It has got something to do with how banks always take money from us, but are very reluctant to give back or like that. This is because, by default FV returns values in negative. = -FV(inflation/12, month number, total monthly usage in hours * watts per hour / 1000 * unit cost) The FV formula calculates sum of above series. There is a spell to get this answer in one shot. Oh, all this math is confusing… Isn’t there a simple spell to answer this? Then, the cost at the end of Month X will be, Let’s say, the blue part of the formula is denoted by something. To understand this formula, first imagine what the total unit cost should be at the end of Month x.įor first month, the cost is = total monthly usage in hours * watts per hour / 1000 * unit cost * (1 + inflation/12)^ 1įor second month, the cost is same as above, but the exponent in the end becomes 2. Wattage per month / 1000 * Inflated unit cost There are 2 variable costs in our analysis. This means, apart from fixed cost at the start of time period, we will also have a variable cost that depends on the life time of bulb type. Since each type of bulb has certain life time, we will have to pay for replacement of bulbs too. The fixed cost for each light bulb type is nothing but the price.īut wait… what about the life time of bulb? This step involves calculating both fixed & variable costs. Once we have all the necessary data, let’s calculate the total cost of each option (Regular, CFL & LED) over a period of 5 years. Once we have all the data, tabulate it in Excel like this: Average usage of bulb per day is 8 hours.This analysis ignores any impact / costs / benefits associated with environmental impact (CO2 emissions, harmful metals like mercury, heat generation etc.).This means we can ignore the benefit part and focus on costs alone Let’s compare bulbs that give same amount of light (lumens).Analysis will be conducted in Indian Rupees.We need only 1 bulb (doing analysis for n bulbs is just a matter of multiplying 1 bulb results with n).Some of the assumptions we can go with are, We also need to assume a few things to keep our cost benefit analysis model realistic & simple. Amount of light (lumens) generated by the bulb.1. Input Data & Assumptionsįor each type of bulb we need to find out below information: Refer to it as you read this article for best results. But first, download the cost benefit analysis workbookĬlick here to download the cost benefit analysis workbook. Let’s conduct cost benefit analysis for our light bulb problem and figure out which option is best. Decide which option is best for chosen time period. ![]() ![]()
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