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Discussion

Rising energy prices over a project's life

  • A.have no effect
  • B.affect only the payback period and not the present value
  • C.increase the value of the savings and improve the economics
  • D.reduce the value of the savings

Answer: C

The saving is a quantity of energy, and if its price rises the money saved rises with it, which makes many measures look better in prospect than a flat-price appraisal suggests. Assuming a particular escalation is itself a risk that a sensitivity analysis should test.

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