An equipment upgrade requires an initial investment of $1,500.

The Simple Payback Period is the time it takes for an investment to pay for itself through savings. To calculate the Simple Payback Period, divide the initial investment by the annual savings. In this case, $1,500.00 USD divided by $500.00 equals 3. To find the exact payback period, consider the rate of return. With a 33% rate of return, the actual savings per year would be $500.00 plus 33% of $500.00, which equals $665.00. Dividing the initial investment of $1,500.00 by $665.00 gives a payback period of approximately 2.26 years, which is closest to two years.

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The concept of Simple Payback Period is a fundamental financial calculation discussed in the LEED AP O+M documentation. It is part of evaluating the cost-effectiveness of energy and water efficiency improvements, particularly under the Energyand Atmosphere and Water Efficiency categories. This metric is commonly used in sustainability projects to assess the viability of efficiency upgrades.