An Overview Of Life-Cycle Cost Analysis Page 16
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21Project evaluation metrics
• Net Savings (sometimes referred to as Net
Present Value, or NPV)
– LCC
- LCC
= Net Savings
base
alternative
– If project cost-effective, Net Savings > 0
• Savings-to-Investment Ratio (SIR)
– (PV of operational savings)/(PV of incremental
investment costs) = SIR
– If project cost-effective, SIR > 1.0
– Useful to prioritize cost-effective projects when
funding insufficient for all
– Do NOT use to choose among mutually-exclusive
options (use Net Savings instead)
16
Energy Exchange: Connect • Collaborate • Conserve
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