The terms interest rate and discount rate are used interchangeably to represent the time value of money. In specific project financing situations, the interest rate on a loan could be significantly different than the appropriate discount rate. The user of these formulas is advised to seek external advice on appropriate interest rates, discount rates, and more sophisticated discounted cash flow techniques when a rigorous financial analysis is required.

The Simplified Levelized Cost Analysis calculation results are in real dollars, i.e., excluding inflation, if the interest or discount rate is in real terms. Straight line depreciation over the project life is assumed for simplicity.

The Price Year Adjustment calculation uses the gross domestic product (GDP) implicit price deflator, a commonly accepted measure of inflation covering all goods and services in the economy. Source: U.S. Department of Commerce Bureau of Economic Analysis (Table 1.1.4). This index is useful for converting dollar values from different years to a common year. Item-specific cost indices are better when attempting to estimate current costs from historical cost data.