Economic Evaluation Methods

There are a number of closely related, commonly used methods for evaluating economic performance. These include the LCC method, levelized cost of energy, NB (net present worth) method, benefit-cost (or savings-to-investment) ratio method, internal rate-of-return method, overall rate-of-return method, and payback method. All of these methods are used when the important effects can be measured in dollars. If incommensurable effects are critical to the decision, it is important that they also be taken into account. But, because only quantified effects are included in the calculations for these economic methods, unquantified effects must be treated outside the models. Brief treatments of the methods are provided; some additional methods are identified but not treated. For more comprehensive treatments, see Ruegg and Marshall (1990) and other sources listed at the end of the chapter.

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