Energy Project Financing : Resources and Strategies for Success

230 Energy Project Financing: Resources and Strategies for Success

Decision: IRR≥MARR (20%>15%); therefore, the window investment is

attractive.

A.7.5 Saving Investment Ratio

Many companies are accustomed to working with benefit cost ra-

tios. An investment measure of worth, which is consistent with the pres-

ent worth measure and has the form of a benefit cost ratio, is the sav-

ings investment ratio (SIR). The SIR decision rule can be derived from the

present worth decision rule as follows:

Starting with the PW decision rule

PW ≥0

replacing PW with its calculation expression

ΣAtP|F,i,t≥^0

t = 0

n

which, using the relationship At = Rt – Ct, can be restated

Σ Rt– Ct P|F,i,t ≥^0

t = 0

n

which can be algebraically separated into

RtP|F,i,t– CΣ tP|F,i,t ≥ 0

t = 0

n

t = 0Σ

n

adding the second term to both sides of the inequality

RtP|F,i,t ≥Σ CtP|F,i,t

t = 0

n

t = 0Σ

n

dividing both sides of the inequality

by the right side term