Energy Project Financing : Resources and Strategies for Success

Appendix A 225

Decision Rule: If PW ≥0, then the investment is attractive.

Example 13
Installing thermal windows on a small office building is estimated
to cost $10,000. The windows are expected to last six years and have no
salvage value at that time. The energy savings from the windows are ex-
pected to be $2525 each year for the first three years, and $3840 for each
of the remaining three years. If MARR is 15%/yr and the present worth
measure of worth is to be used, is this an attractive investment?

Figure A-7. Thermal windows investment

The cash flow diagram for the thermal windows is shown in Figure A-7.

PW =
–10000+2525(P|F,15%,1)+2525(P|F,15%,2)
+2525(P|F,15%,3)+3840(P|F,15%,4)+
3840(P|F,15%,5)+
3840(P|F,15%,6)

PW =
–10000+2525(0.8696)+2525(0.7561)
+2525(0.6575)+
3840(0.5718)+3840(0.4972)+
3840(0.4323)

PW =
–10000+2195.74+1909.15+1660.19+2195.71
+1909.25+1660.03

PW = $1530.07