ASTM E1074-04

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An American National Standard
Designation: E 1074 – 04
Standard Practice for
Measuring Net Benefits and Net Savings for Investments in
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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 (e) indicates an editorial change since the last revision or reapproval.
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 2.2 ASTM Adjuncts:
Discount Factor Tables,
1.1 This practice provides a recommended procedure for
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Adjunct to Practice E 917
calculating and interpreting the NB (NS) method in the
evaluation of building designs and systems.
3. Terminology
2. Referenced Documents 3.1 Definitions—For definitions of terms used in this
2 practice, refer to Terminology E 833.
2.1 ASTM Standards:
E 833 Terminology of Building Economics
4. Summary of Practice
E 917 PracticeforMeasuringLife-CycleCostsofBuildings
4.1 This practice is organized as follows:
and Building Systems
4.1.1 Section 2, Referenced Documents—Lists ASTM stan-
E 964 Practice for Measuring Benefit-to-Cost and Savings-
dards referenced in this practice.
to-Investment Ratios for Buildings and Building Systems
4.1.2 Section 3, Definitions—Addresses definitions of terms
E 1057 Practice for Measuring Internal Rate of Return and
used in this practice.
Adjusted Internal Rate of Return for Investments in Build-
4.1.3 Section 4, Summary of Practice—Outlines the con-
ings and Building Systems
tents of the practice.
E 1121 Practice for Measuring Payback for Investments in
4.1.4 Section 5, Significance and Use—Explains the appli-
Buildings and Building Systems
cation of the practice and how and when it should be used.
E 1185 Guide for Selecting Economic Methods for Evalu-
4.1.5 Section 6, Procedures—Summarizes the steps in mak-
ating Investments in Buildings and Building Systems
ing NB (NS) analysis.
4.1.6 Section 7, Compute NB (NS)—Describes calculation
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procedures for NB (NS).
This practice is under the jurisdiction of ASTM Committee E06 on Perfor-
mance of Buildings and is the direct responsibility of Subcommittee E06.81 on 4.1.7 Section 8, Applications—Explains circumstances un-
Building Economics.
der which the NB (NS) method is appropriate.
Current edition approved April 1, 2004. Published April 2004. Originally
4.1.8 Section 9, Report—Identifies information that should
e1
approved in 1985. Last previous edition approved in 1998 as E 1074 – 93 (1998) .
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be included in a report of a NB (NS) analysis.
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
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the ASTM website. Available from ASTM International. Order PCN 12-509179-10.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
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E 1074 – 04
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,thesinglepresentvalue(SPV)discountfactorismultipliedtimesthenetcashflow.Foranexplanation
of discounting factors and how to use them, see Discount Factor Tables, adjunct to Practice E 917.
5. Significance and Use differencesbetweencosts,forthatprojectrelativetoamutually
exclusive alternative. Computation of NS for any given pro
...