7.2 Profit variance analysis

In this method, plant-wise profit analysis is carried out by the auditor and the estimated gain adjusted with the inflationary effect is compared with actual. An important point to note here is that even if the aggregates of gains (realized and estimated) are the same there can be wide variations for individual projects, indicating the need for further investigations

depreciation is defined as the decline in the present value of the expected future cash flow during the year using the IRR as the discount rate. Two models, namely the IRR model and the NPV model, are suggested under the technique of present

> n t�1

where CFt = cash flow in period t; K = discount rate; C = initial outlay

There are numerous literatures that have dealt with this subject of building energy audit. This particular text emphasizes economic assessment moving from a theoretical review of the subject of building energy analysis with respect to thermal conditions of the building envelope. The process of obtaining data for building energy audit was spelt out from the review of prevalent building information modeling software which were analyzed to obtain actual and project energy loads. The point of divergence of the two measures were econometrically reviewed to ascertain financial control mechanism, providing information for future capital

I am indebted of thanks and gratitude to authors whose text materials were used to form the theoretical bedrock for economic analysis particularly of mention is the Kreider J.F. and Rabl A., Jangalve, A., Kamble, V., Gawandi, S., and Ramani,

CFt

ð Þ <sup>1</sup> � <sup>K</sup> <sup>t</sup> � <sup>C</sup> (51)

NPV ¼ ∑

expenditure decision, impacts on proposals for capital investments.

N. and Patel, B.M. I cannot thank them enough.

This text has no conflict of interest declaration.

\* and Ovie I. Akpokodje<sup>2</sup>

2 Department of Civil Engineering, Delta State Polytechnic, Ozoro

\*Address all correspondence to: samuelegwunatum@gmail.com

provided the original work is properly cited.

1 Department of Quantity Surveying, Federal University of Technology, Owerri,

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

value depreciation in Eq. (51).

Economic Aspects of Building Energy Audit DOI: http://dx.doi.org/10.5772/intechopen.85490

8. Conclusions

Acknowledgements

Conflict of interest

Author details

Nigeria

143

Samuel I. Egwunatum<sup>1</sup>

## 7.3 Cash flow and financial criteria analysis

This method is developed around four schedules described below. These schedules can provide the management with the information it needs to find engineering, operational and administrative costing faults of past projects.


#### 7.4 Present value depreciation technique

Discounting factor technique give only a single value of the NPV which is for the whole life of the project. The IRR is the average return during the life. But at the time of conducting the energy audit, the major part of the project life is not completed. Then how can we compare the actual with the total net present value or average internal rate of return? A uniform annual series cannot be considered because it is an average figure and the project need not offer and NPV at a constant rate over its life. The concept of e present value of depreciation is used in some techniques for the calculation of the year-wise NPV and IRR. Present value

Economic Aspects of Building Energy Audit DOI: http://dx.doi.org/10.5772/intechopen.85490

depreciation is defined as the decline in the present value of the expected future cash flow during the year using the IRR as the discount rate. Two models, namely the IRR model and the NPV model, are suggested under the technique of present value depreciation in Eq. (51).

$$NPV = \sum\_{t=1}^{n} \frac{CF\_t}{\left(1 - K\right)^t} - C \tag{51}$$

where CFt = cash flow in period t; K = discount rate; C = initial outlay
