ABSTRACT
The payback period is the time required to recover the capital investment out of the annual savings. The payback period is determined by dividing the cost of the retrofit measure by the annual energy cost savings, using current fuel prices, to come up with some number of years after which the investment will have supposedly paid for itself. Money transactions are thought of as a cash flow to or from a company. Investment decisions also take into account alternate investment opportunities and the minimum return on the investment. Cash flow diagrams are often used to help visualize the flow of capital throughout the term of an investment or life of an investment in energy efficiency improvements. The Equivalent Uniform Annual Costs is a method used to compare alternatives with different lifetimes. The method is to prepare a cash flow diagram and convert each alternative into a present value.
