Chapter 8: Economic Evaluation

8.1 Introduction

The decision to use cold-air distribution technology to provide space conditioning is grounded in economics. The use of cold-air distribution is motivated by the prospect of economic benefit relative to other cooling systems. The benefit might be a reduction in first cost, operating cost, or both, or an improvement in the environment maintained by the system. The economic evaluation attempts to put a relative value on first costs incurred in the present and operating costs incurred over a number of years to provide a meaningful comparison of alternatives.

The inputs to the economic evaluation are the first costs and operating costs of a number of alternatives and the owner's financial analysis criteria. The result is a ranking of the alternatives in terms of economic attractiveness.

This section provides an overview of the economic considerations associated with cold-air distribution design.

8.2 Methods of Economic Analysis

In any comparison of alternative systems, there will be differences in first costs and operating costs that must be balanced against each other to determine which option is most advantageous to the owner. A number of methods of economic analysis are used to make these comparisons. Sophisticated owners will have their own criteria for judging economic alternatives. However, in many cases, the manner in which the economic information is presented can have an effect on which alternative is chosen.

The simple payback method is a commonly used economic analysis technique. This approach simply evaluates the ratio of the annual operating cost savings to the...