eml 6417 lec 2 - 1 UNIVERSITY OF FLORIDA Solar Utilization...

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Unformatted text preview: 1 UNIVERSITY OF FLORIDA Solar Utilization LIFE CYCLE COST ANALYSIS SIMPLE PAY BACK ANALYSIS (NOT REALLY LCC) PRESENT WORTH METHOD ANNUAL COST METHOD SAVINGS TO INVESTMENT RATIO OTHER METHODS E.G. ROR See the NIST Handbook 135 and supplement (2009) 2 UNIVERSITY OF FLORIDA Solar Utilization LIFE CYCLE COST ANALYSIS SIMPLE PAYBACK METHOD SPB = FIRST COST/ SAVINGS/YR H. A.. . Ingley PhD,PE 3 UNIVERSITY OF FLORIDA Solar Utilization LIFE CYCLE COST ANALYSIS SIMPLE PAYBACK METHOD DOES NOT CONSIDER TIME VALUE OF MONEY MAY BE OK WITH LOW INTEREST RATES 3 YEARS OR LESS IS GOOD H. A.. . Ingley PhD,PE 4 UNIVERSITY OF FLORIDA Solar Utilization SIMPLE PAYBACK METHOD OPTION A FIRST COST: $20,000 OPTION B FIRST COST: $25,000 ENERGY COST SAVINGS USING OPTION B: $2,500 PER YEAR SPB = $5,000/$2,500/YR = 2 YRS H. A.. . Ingley PhD,PE 5 UNIVERSITY OF FLORIDA Solar Utilization PRESENT VALUE METHOD RETURNS ALL FUTURE ENERGY AND MAINTENANCE COSTS TO TODAYS DOLLARS CONSIDERS TIME VALUE OF MONEY H. A.. . Ingley PhD,PE 6 UNIVERSITY OF FLORIDA Solar Utilization PRESENT VALUE METHOD Discount Rates: What are they? No universal consensus on what discount rate should be used for some applications, e.g. lease vs. buy problems. The most commonly accepted method of determining the rate is to use the after-tax cost of debt. For example, if the cost of debt financing for the project is 10% and the firm pays 50% income tax, the discount rate is 5%. I generally refer to the discount rate at the Cost of money. 7 UNIVERSITY...
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eml 6417 lec 2 - 1 UNIVERSITY OF FLORIDA Solar Utilization...

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