Certified Energy Auditor Economic Analysis of Projects Questions and Answers

Question 1

An energy efficiency project has an initial cost of $120,000 and is expected to generate annual savings of $30,000.
The company also secured a one-time utility rebate of $15,000 upon project completion.
What is the Simple Payback Period (SPP) for this project?

Accepted Answer

3.5 years

Answer

4.0 years

Answer

4.5 years

Answer

5.0 years

Question 2

An energy project is evaluated using the company's minimum attractive rate of return (MARR) as the discount rate. The analysis shows a Net Present Value (NPV) of $5,000. What does this positive NPV signify?

Accepted Answer

The project's return is greater than the company's MARR.

Answer

The project's return is less than the company's MARR.

Answer

The project will pay for itself in exactly one year.

Answer

The project's return is exactly equal to the company's MARR.

Question 3

Which of the following economic metrics is defined as the discount rate at which the Net Present Value (NPV) of all cash flows (both inflows and outflows) from a project equals zero?

Accepted Answer

Internal Rate of Return (IRR)

Answer

Return on Investment (ROI)

Answer

Simple Payback Period (SPP)

Answer

Savings-to-Investment Ratio (SIR)

Question 4

A hospital is deciding between two different chillers. Chiller A has a low initial purchase price but higher projected annual energy and maintenance costs. Chiller B has a significantly higher initial cost but is much more efficient, leading to lower annual costs over its 20-year expected life. Which economic analysis method is most suitable for comparing these two options?

Accepted Answer

Life Cycle Cost Analysis (LCCA)

Answer

Simple Payback Period (SPP)

Answer

First-year Return on Investment (ROI)

Answer

Annual benefit analysis

Question 5

When performing a discounted cash flow analysis for an energy project, the 'time value of money' principle is a core concept. This principle fundamentally states that:

Accepted Answer

A dollar received today is worth more than a dollar received in the future.

Answer

Energy costs will always inflate over time.

Answer

The project's maintenance costs will increase as it ages.

Answer

The simple payback period must be less than the equipment's useful life.

Question 6

An energy project's analysis yields a Savings-to-Investment Ratio (SIR) of 1.4. Which of the following is the correct interpretation of this result?

Accepted Answer

The present value of the project's lifetime savings is 1.4 times its initial investment cost.

Answer

The project will pay for itself in 1.4 years.

Answer

For every dollar invested, the project returns $0.40 in net savings.

Answer

The project's lifetime costs are 1.4 times its lifetime savings.

An energy efficiency project has an initial cost of $120,000 and is expected to generate annual savings of $30,000.The company also secured a one-time utility rebate of $15,000 upon project completion.What is the Simple Payback Period (SPP) for this project?

An energy efficiency project has an initial cost of $120,000 and is expected to generate annual savings of $30,000.
The company also secured a one-time utility rebate of $15,000 upon project completion.
What is the Simple Payback Period (SPP) for this project?