Financial Decision Methods – Payback and Internal Rate of Return

Whenever there is a decision to be made regarding an investment in equipment or systems to make operating cost improvements, companies typically want to know if the up-front investment to achieve the improvements is worth the cost and risk of making the investment.

Three common methods to evaluate the financial implications of the various improvement options are: 

1. Simple payback
2. Discounted payback
3. Internal rate of return (IRR) analysis

In this 3-page whitepaper from Thomas E. Haan, Principal, Global Equity Consulting, LLC, he educates us about these methods of evaluation of the benefits of making investments to improve MTBR and enhance the energy efficiency of equipment and systems.

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