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The increasing speed gap between processors and memory makes the design of memory hierarchy one of the critical issues in general purpose embedded systems. As memory requirements for embedded applications grow, especially in emerging area of handheld multimedia devices, cache memories become crucial for providing high performance and reducing power. This paper describes a performance evaluation of typical cache design issues such as cache size and organization, block size, and replacement policy. The evaluation is done using simulation tools for architectural exploration based on ARM instruction set and MiBench benchmark suite. Our performance evaluation includes monitoring of dynamic cache behavior, since embedded systems designers are interested not only in the total number of cache misses, but also in the number of cache misses throughout application execution.