1. Calculating Payback Period

2. Formula
Payback Period = Initial Investment Net annual savings + Income

3. Other considerations
Are there additional costs associated with the project?
Additional Staff Time?
Additional maintenance fees?
Additional energy costs?

4. Payback Period Example
You are currently spending $15,000/yr in hauling fees to have cardboard recyled. You learn that if you bale the cardboard, you can get paid market price per ton for the bales. The cost of a baler is $12,000 and the current market price of bales is $80/ton. You produce approximately 100 tons of cardboard per year. Payback Period = $12,000 = 0.52 year $15,000 + $8000

5. Payback Period Exercise-LED Retrofit
Calculate Your Current Costs
After you’ve gathered the information, you can use it to determine the current costs to your business. To calculate the existing energy use in kWh:
existing fixture quantity x fixture wattage x hours per year = kWh ` 1000
Calculate the total yearly energy costs:
kWh x utility rate
Calculate the yearly maintenance costs:
total number of lamps x $6 (estimated industry average)
- See more at: retrofit-roi-with-tools-and-formulas#sthash.UVsdwZVA.dpuf

6. Payback Period Exercise-LED Retrofit
Calculate the Proposed System's Costs
1) Determine how much energy the proposed LED system will use in kWh per year:
kWh= proposed fixture quantity x LED fixture wattage  x hours per year
2) Find the total yearly energy cost for the proposed LED system:
Total Yearly Energy Cost =kWh x utility rate
3) Calculate the installation costs of the new system:
Installation Cost = proposed fixture quantity x installation cost per fixture
4) Calculate the total fixture cost:
proposed fixture quantity x proposed fixture cost
5) The total cost for the proposed LED system is determined by:
total installation cost + total fixture cost