ASTM E1057-15

This document is not an ASTM standard and is intended only to provide the user of an ASTM standard an indication of what changes have been made to the previous version. Because
it may not be technically possible to adequately depict all changes accurately, ASTM recommends that users consult prior editions as appropriate. In all cases only the current version
of the standard as published by ASTM is to be considered the official document.
Designation: E1057 − 06 (Reapproved 2010) E1057 − 15
Standard Practice for
Measuring Internal Rate of Return and Adjusted Internal
Rate of Return for Investments in Buildings and Building
1
Systems
This standard is issued under the fixed designation E1057; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
INTRODUCTION
The internal rate-of-return (IRR) and adjusted internal rate-of-return (AIRR) methods are members
of a family of economic evaluation methods that provide measures of economic performance of an
investment over time. Other methods in this family of evaluation methods are life-cycle cost analysis,
net benefits and net savings analysis, benefit-to-cost and savings-to-investment ratio analysis, and
payback analysis.
The IRR and AIRR methods are the topic of a single standard practice because they both measure
economic performance as a compound yield on investment. The IRR is the compound rate of interest
that, when applied as a discount rate to a project’s stream of dollar benefits and costs, will equate them.
The AIRR is the overall yield taking into account earnings on receipts reinvested to the end of the
study period. The IRR or AIRR is compared against the investor’s minimum acceptable rate of return
(MARR), and the investment is considered economically attractive if the calculated yield exceeds the
MARR. If an investment entails an initial outlay and a single receipt at the end of the study period,
there is no difference between the IRR and the AIRR. But if cash flows occur over multiple time
periods, the two will normally be different. This arises because the AIRR includes in its measure the
return on reinvestment of receipts, whereas the IRR does not.
The AIRR is recommended for most applications in which a measure of yield is desired. Caution
is recommended in applying either measure, however, because problems arise under certain
conditions.
1. Scope
1.1 This practice covers a procedure for calculating and interpreting the internal rate of return (IRR) and adjusted internal rate
of return (AIRR) measures in the evaluation of building designs, systems, and equipment.
1.2 The values stated in inch-pound units are to be regarded as standard. The values given in parentheses are mathematical
conversions to SI units that are provided for information only and are not considered standard.
1.3 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility
of the user of this standard to establish appropriate safety and health practices and determine the applicability of regulatory
limitations prior to use.
2. Referenced Documents
2
2.1 ASTM Standards:
E631 Terminology of Building Constructions
E833 Terminology of Building Economics
E917 Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
1
This practice is under the jurisdiction of ASTM Committee E06 on Performance of Buildings and is the direct responsibility of Subcommittee E06.81 on Building
Economics.
Current edition approved Oct. 1, 2010May 1, 2015. Published November 2010June 2015. Originally approved in 1985. Last previous edition approved in 20062010 as
ε1
E1057 – 06 (2010). . DOI: 10.1520/E1057-06R10.10.1520/E1057-15.
2
For referenced ASTM standards, visit the ASTM website, www.astm.org, or contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM Standards
volume information, refer to the standard’s Document Summary page on the ASTM website.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
1

---------------------- Page: 1 ----------------------
E1057 − 15
E964 Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
E1074 Practice for Measuring Net Benefits and Net Savings for Investments in Buildings and Building Systems
E1121 Practice for Measuring Payback for Investments in Buildings and Building Systems
E1185 Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
E1369 Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building
Systems
E1765 Practice for Applying Analytical Hierarchy Process (AHP) to Multiattribute Decision Analysis of Inve
...