ASTM E1074-06e2

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.
´2
An American National Standard Designation: E 1074 – 06
Designation:E 1074–04
Standard Practice for
Measuring Net Benefits and Net Savings for Investments in
1
Buildings and Building Systems
This standard is issued under the fixed designation E 1074; 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.
This standard is issued under the fixed designation E 1074; 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.
1
´ NOTE—Footnotes updated editorially in August 2007.
2
´ NOTE—Section 2.2 and Footnote 4 were editorially corrected in January 2009.
INTRODUCTION
The net benefits (NB) and net savings (NS) methods are part of a family of economic evaluation
methods that provide measures of economic performance of an investment over some period of time.
Included in this family of evaluation methods are life-cycle cost analysis, benefit-to-cost and
savings-to-investment ratios, internal rates of return, and payback analysis.
The NB method calculates the difference between discounted benefits and discounted costs as a
measure of the cost effectiveness of a project. The NS method calculates the difference between
life-cycle costs as a measure of the cost-effectiveness of a project. The NB and NS methods are
sometimescalledthenetpresentvaluemethod.TheNBandNSmethodsareusedtodecideifaproject
is cost effective (net benefits greater than zero, or net savings greater than zero), or which size, or
design, competing for a given purpose is most cost effective (the one with the greatest net benefits, or
the one with the greatest net savings).
1. Scope
1.1 This practice providescovers a recommended procedure for calculating and interpreting the net benefits (NB) and net
savings (NS) methods in the evaluation of building designs and systems.
2. Referenced Documents
2
2.1 ASTM Standards:
E 631 Terminology of Building Constructions
E 833 Terminology of Building Economics
E 917 Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
E 964 Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
E1057Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and
Building Systems
E 1057 Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and
Building Systems
E 1121 Practice for Measuring Payback for Investments in Buildings and Building Systems
E 1185 Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems Guide for
Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
E 1369 Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation 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.
´1
Current edition approvedApril 1, 2004.2006. PublishedApril 2004.2006. Originally approved in 1985. Last previous edition approved in 19982004 as E1074–93 (1998) .
E 1074 – 04.
2
For referencedASTM standards, visit theASTM website, www.astm.org, or contactASTM 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 ----------------------
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E1074–06
E 1765 Practice for Applying Analytical Hierarchy Process (AHP) to Multiattribute Decision Analysis of Investments Related
to Buildings and Building Systems
E 1946 Practice for Measuring Cost Risk of Buildings and Building Systems
E 2204 Guide for Summarizing the Economic Impacts of Building-Related Projects
2.2 ASTM Adjuncts:
Discount Factor Tables, Adjunct to Practice E917 Adjuncts:
3
Discount Factor Tables Adjunct to Practices E 917, E 964, E 1057, E 1074, and E 1121
3. Terminology
3.1 Definitions—Fo
...

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.
´1 ´2
Designation:E 1074–06 Designation: E 1074 – 06
Standard Practice for
Measuring Net Benefits and Net Savings for Investments in
1
Buildings and Building Systems
This standard is issued under the fixed designation E 1074; 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.
1
´ NOTE—Footnotes updated editorially in August 2007.
—Footnotes updated editorially in August 2007.
2
´ NOTE—Section 2.2 and Footnote 4 were editorially corrected in January 2009.
INTRODUCTION
The net benefits (NB) and net savings (NS) methods are part of a family of economic evaluation
methods that provide measures of economic performance of an investment over some period of time.
Included in this family of evaluation methods are life-cycle cost analysis, benefit-to-cost and
savings-to-investment ratios, internal rates of return, and payback analysis.
The NB method calculates the difference between discounted benefits and discounted costs as a
measure of the cost effectiveness of a project. The NS method calculates the difference between
life-cycle costs as a measure of the cost-effectiveness of a project. The NB and NS methods are
sometimescalledthenetpresentvaluemethod.TheNBandNSmethodsareusedtodecideifaproject
is cost effective (net benefits greater than zero, or net savings greater than zero), or which size, or
design, competing for a given purpose is most cost effective (the one with the greatest net benefits, or
the one with the greatest net savings).
1. Scope
1.1 This practice covers a recommended procedure for calculating and interpreting the net benefits (NB) and net savings (NS)
methods in the evaluation of building designs and systems.
2. Referenced Documents
2
2.1 ASTM Standards:
E 631 Terminology of Building Constructions
E 833 Terminology of Building Economics
E 917 Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
E 964 Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
E1057Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and
Building Systems
E 1057 Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and
Building Systems
E 1121 Practice for Measuring Payback for Investments in Buildings and Building Systems
E 1185 Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
E 1369 Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and
Building Systems
E 1765 Practice for Applying Analytical Hierarchy Process (AHP) to Multiattribute Decision Analysis of Investments Related
to Buildings and Building Systems
E 1946 Practice for Measuring Cost Risk of Buildings and Building Systems
E 2204 Guide for Summarizing the Economic Impacts of Building-Related Projects
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 April 1, 2006. Published April 2006. Originally approved in 1985. Last previous edition approved in 2004 as E 1074 – 04.
2
For referencedASTM standards, visit theASTM website, www.astm.org, or contactASTM 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 ----------------------
´2
E1074–06
2.2 ASTM Adjuncts:
Discount Factor Tables Adjuncts:
3
Discount Factor Tables Adjunct to Practices E 917, E 964, E 1057, E 1074, and E 1121
3. Terminology
3.1 Definitions—For definitions of terms used in this practice, refer to Terminologies E 631 and E 833.
TABLE 1 Calculation of Net Benefits
A
Net Cash Flow SPV Factor
Year, t Benefits, B, dollars Costs, C , dollars PVNB, dollars
t t
B − C , dollars fori=15 %
t t
0 0 10 000 −10 000 1.000 −10 000
1 4 000 3 000 +1 000 0.8696 +870
2 11 500 4 500 +7 000 0.7561 +5 293
3 10 000 4 000 +6 000 0.6575 +3 945
4 8 000 5 000 +3 000 0.5718 +1 715
Total 33 500 26 500 +7 000 +1 823
A
TofindthePVNBofthenetcashflowforeachdiscountingperiod,thes
...