| thickness | installation cost | annual savings | Maintenance once in each 2 years |
| 2cm | 217000 | 68000 | 4600 |
| 5cm | 446000 | 125000 | 0 |
Useful lives of both alternatives are 10 years. Find the best alternative using simple payback period method
Take the case when thickness is 2 cm
| Year | Cash flow | Cumulative cash flow |
| 0 | -217000 | -217000 |
| 1 | 68000 | -149000 |
| 2 | 63400 | -85600 |
| 3 | 68000 | -17600 |
| 4 | 63400 | 45800 |
Simple payback period in case thickness is 2 cms=3+17600/63400=3.28
Take the case when thickness is 5 cm
Simple payback period in case thickness is 5 cm=Initial cost/Annual savings
Simple payback period in case thickness is 5 cm=446000/125000=3.57 years
Simple payback is lower in case of alternative with thickness is 2 cm. So, alternative with thickness 2 cm should be selected.
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