Certified Energy Auditor Certification Certified Energy Auditor Economic Analysis of Projects Questions and Answers 2

Question 1

An energy auditor is comparing two lighting retrofit options.
Option A costs $12,000 with annual savings of $3,600, and Option B costs $18,000 with annual savings of $5,000.
Using simple payback period, which option pays back faster?

Accepted Answer

Option A at 3.33 years

Answer

Option B at 3.60 years

Answer

Both have the same payback period

Answer

Neither option is economically viable

Question 2

What is the primary limitation of using simple payback period as the sole criterion for evaluating energy conservation measures?

Accepted Answer

It ignores the time value of money and savings beyond the payback period

Answer

It requires too much data to calculate accurately

Answer

It overestimates the value of long-term projects

Answer

It cannot be applied to lighting upgrades

Question 3

A facility is evaluating an HVAC upgrade with an initial cost of $50,000, annual energy savings of $8,000, and a useful life of 12 years. Using a discount rate of 6%, what financial metric best captures the total economic value over the project life?

Accepted Answer

Net Present Value

Answer

Simple payback period

Answer

Return on investment percentage

Answer

Average annual cost

Question 4

When calculating the Savings-to-Investment Ratio (SIR) for an energy project, what does a ratio greater than 1.0 indicate?

Accepted Answer

The present value of savings exceeds the present value of costs

Answer

The project will pay for itself within one year

Answer

The annual savings equal the initial investment

Answer

The project has no associated maintenance costs

Question 5

In a life cycle cost analysis for an energy conservation measure, which of the following costs should be included?

Accepted Answer

Initial cost, annual energy savings, maintenance costs, and replacement costs

Answer

Only the initial installation cost and energy savings

Answer

Only costs occurring within the simple payback period

Answer

Initial cost and first-year energy savings only

Question 6

An energy auditor must choose between two boiler replacements. Both have the same net present value, but Project X has an internal rate of return of 18% while Project Y has an IRR of 12%. What does this difference indicate?

Accepted Answer

Project X generates a higher return per dollar invested

Answer

Project Y has lower initial costs

Answer

Project X has a longer useful life

Answer

Both projects are equally attractive investments

An energy auditor is comparing two lighting retrofit options.Option A costs $12,000 with annual savings of $3,600, and Option B costs $18,000 with annual savings of $5,000.Using simple payback period, which option pays back faster?

An energy auditor is comparing two lighting retrofit options.
Option A costs $12,000 with annual savings of $3,600, and Option B costs $18,000 with annual savings of $5,000.
Using simple payback period, which option pays back faster?