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There are several ways to evaluate the economic viability of a potential CHP project investment and compare multiple energy investment options. The two most common are payback analysis and life cycle cost (LCC) analysis. Both methods require determining costs, revenues, and savings attributable to the project, costs attributable to a baseline or alternative case, and developing net annual cash flows (pro forma). Key distinctions are that LCC examines the total life of the project while simple payback gives equal weight to all cash flows before the payback date and no weight to any subsequent cash flows. |