1. CALCULATING PAYBACK PERIOD

2. Formula Payback Period = Initial Investment Net annual savings + Income

3. Other considerations  Are there additional costs associated with the project?  Additional Staff Time?  Additional maintenance fees?  Additional energy costs?

4. Payback Period Example You are currently spending $15,000/yr in hauling fees to have cardboard recyled. You learn that if you bale the cardboard, you can get paid market price per ton for the bales. The cost of a baler is $12,000 and the current market price of bales is $80/ton. You produce approximately 100 tons of cardboard per year. Payback Period = $12,000= 0.52 year $15,000 + $8000

5. Payback Period Exercise-LED Retrofit Calculate Your Current Costs  After you’ve gathered the information, you can use it to determine the current costs to your business. To calculate the existing energy use in kWh: existing fixture quantity x fixture wattage x hours per year = kWh `1000  Calculate the total yearly energy costs: kWh x utility rate  Calculate the yearly maintenance costs: total number of lamps x $6 (estimated industry average) - See more at: http://solutions.borderstates.com/how-to-calculate-led-lighting- retrofit-roi-with-tools-and-formulas#sthash.UVsdwZVA.dpuf

6. Payback Period Exercise-LED Retrofit Calculate the Proposed System's Costs 1) Determine how much energy the proposed LED system will use in kWh per year: kWh= proposed fixture quantity x LED fixture wattage x hours per year 1000 2) Find the total yearly energy cost for the proposed LED system: Total Yearly Energy Cost =kWh x utility rate 3) Calculate the installation costs of the new system: Installation Cost = proposed fixture quantity x installation cost per fixture 4) Calculate the total fixture cost: proposed fixture quantity x proposed fixture cost 5) The total cost for the proposed LED system is determined by: total installation cost + total fixture cost