ABSTRACT
The true economic cost includes opportunity costs of foregone investments, energy conservation opportunities should be considered profitable only when their expected rate of return is greater than what could be realized from alternative investment opportunities. In addition, the cost of energy in the future will play an important part in the decision. A benefit/cost ratio less than 1 implies that an investment will not be profitable. Using the same data, let us calculate the benefit/cost analysis and the time to recoup investment. The payback period is then compared to the expected lifetime, of the investment to determine the approximate recovery of the investment. Applying the Return on investment concept, the depletion of the investment over its economic life is accounted for through depreciation charges, DC. If the correct discount rate is used, any investment recouped in a period less than its lifetime should be considered profitable.
