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ENERGY STAR ® Building Manual3. Investment Analysis



All types of organizations, for-profit and not-for-profit alike, should analyze prospective investments based on their expected cash flows. If a business is contemplating an investment to support a higher level of sales, it should weigh the cost of the investment and any related operating expenses against the additional cash benefits to the business from the projected incremental sales. Only if the expected cash inflow is more valuable than the expected outflow should the investment move forward. Building upgrades for energy performance also generate cash flow, but not through sales; instead, they reduce the cash flowing out to pay for energy. In some circumstances, energyefficiency investments can also produce non-energy cash benefits, such as maintenance savings. From the standpoint of the organization’s financial health, reduced cash outflow—such as savings in energy and maintenance costs—is just as valuable as increased cash inflow from sales. Organizations typically employ one or more financial analysis tools rooted in cash flow to study, rank, and choose among investment opportunities. To successfully compete for capital against other investments, building upgrades should be evaluated using the same tools

Year: 2007
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