calculation

Equivalent annual annuity (EAA) represents the annualized value of costs or cash flows over the lifespan of an investment. For instance, if a piece of equipment costs $10,000 upfront and generates $3,000 in savings annually for five years, the EAA calculation would convert those uneven cash flows into a constant annual stream. This allows for direct comparison with alternative investments having different lifespans.

This methodology provides a standardized metric for investment appraisal, particularly useful when comparing projects with differing durations and initial costs. By converting all cash flows into a level annual stream, decision-makers can objectively evaluate profitability and make informed choices about resource allocation. The historical development of this financial tool stems from the need to simplify complex investment analyses and improve capital budgeting decisions.

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Energy Use Intensity (EUI) quantifies a building’s energy performance by comparing its annual energy consumption to its gross floor area. For example, an office building consuming 50,000 kBtu per year with a gross floor area of 10,000 square feet would have an EUI of 5 kBtu/(ftyr). This metric provides a standardized way to assess and compare the energy efficiency of buildings regardless of their size or function.

Tracking and analyzing this metric is crucial for identifying areas for improvement in building energy performance. A lower value generally indicates better energy efficiency. Understanding this performance indicator is becoming increasingly important due to rising energy costs, increasing awareness of environmental impact, and the emergence of energy benchmarking regulations. Historical data can be used to track performance improvements over time and establish realistic energy reduction targets.

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