Quantcast Present worth analysis and savings investment ratio

Custom Search

Fuel costs are available from activity copy of DEIS II report or from
NAVFACENGCOM DEIS II report.  Fuel costs should be escalated (above the
general inflation rate) by the factors given here:
FY 79 & 80
FY 81 thru 83  FY 84 & Beyond
Fuel Oil
16 Percent
14 Percent
8 Percent
Natural Gas & Liquefied
15 Percent
14 Percent
8 Percent
16 Percent
13 Percent
7 Percent
Use latest available fuel escalation rates, such as ECIP Guidance, NAVFAC
Criteria, DoD Criteria, etc.  These rates, which are really future
projections, change often.
3 7.2 Operating and maintenance (O&M) costs.  Depending on the type of
solar system selected these costs will vary from 0% to as high as 10% of the
initial installed cost of the system.  These annual costs must be deducted
from the annual fuel savings, however they do not have to be escalated above
the general rate of inflation.  Certain economic analysis techniques (Section set these costs equal to zero.  Current guidance is to use about 3%
per year for O&M on flat plate solar collector systems.  More elaborate
systems such as concentrating collectors, evacuated tube collectors, glycol
systems may require a higher O&M cost.  A certain amount of judgement may
have to be used in assessing the O&M costs based on the user's experience
with other or similar systems already installed.  In lieu of such knowledge
it is recommended that these costs be carefully investigated either with the
manufacturer or other published data.  At this time O&M costs of 3% - 8%
would not be unreasonable for high maintenance systems.  See also Durlak
(1983) for more information on maintenance items.
3.7.3 Present worth analysis and savings investment ratio.  The technique
of present worth analysis (NAVFAC Manual P-442) effectively compares costs
and savings which occur in the future with capital costs that are incurred
immediately as the project is constructed.  A discount factor is used which
accounts for the time value of money in an inflationary economy.  In addition
differential escalation rates are used to account for the fact that some
items (such as fuel) increase in cost faster than the general inflation rate.
ln an attempt to fairly estimate the worth of a proposed project, various
rates have been assigned to the discount factor and differential escalation
rates over the years.  The current differential escalation rates are given in
Section 3.7.1.  Historically, the discount factor has been 10%, but as of mid
FY 81, DOD was instructed to use the 7% discount factor.  Also for an interim
period from about December 1978 to early 1981, a 0% discount factor was
recommended by NAVFACINST 11010.14M, dated 14 December 1978.


Privacy Statement - Copyright Information. - Contact Us

Integrated Publishing, Inc.