Life Cycle costing

Q. Use the Present Worth Method to determine the Total Cost ( LCC )
of the three alternatives below
1. Three projects 30 year
Interest = 10%
Escalation = 0%
Project Project Project
Item
A B C
Construction cost 55,000 70,000 90,000
Repair and spare parts for project A at
5,000
year 7 and spare parts for project B at
Repair
7,000
year 11and spare parts for project C at
Repair
8,000
year 13
Periodical maintenance every 10 years 4,000 6,000 8,000
Salvage Value 5,000 20,000 35,000
Annual O&M 5,000 4,000 4,000
Annual Revenue 3,700 8,000 13,000

2. Car Purchase Life Span 5 years

Rate 8%

Item Car A Car B Car C

Price 70,000 90,000 105,000
Registration 300 300 300
Rebate at purchase 1,500 4,000 0
Replace wheels every two years 1,200 2,000 2,600
Repair at year 3 2,000 5,000 7,000
Salvage Value 30,000 37,000 60,000
Annual Maintenance 1,700 5,000 3,200
Annual Fuel cost 300 900 700
LIFE CYCLE COST (Present Worth Method)
Project: Three Projects
PROJECT LIFE CYCLE (YEARS30

DISCOUNT RATE (PERCENT) 10% Project A Project B Project C

Initial Costs Est. PW Est. PW Est. PW

Construction cost 55,000 55,000 70,000 70,000 90,000 90,000

Total Initial Cost Impact (IC) , Sub 1 55,000 70,000 90,000
Replacement/Salvage CostsYear Factor
Repare for Projact A 7 0.5132 5,000 2,565
Repare for project B 11 0.3505 7,000 2,453
Repare for project C 13 0.2897 8,000 2,317
Maintenance for all projects 10 0.3855 4,000 1,542 6,000 2,313 8,000 3,084
Maintenance for all projects 20 0.1486 4,000 594 6,000 891 8,000 1,189
Salvage 30 0.0573 (5,000) (286) (20,000) (1,146) (35,000) (2,005)
Total Replacement/Salvage PW Costs, Sub 2 4,415 4,511 4,585
Annual costs Escl. % PWA

Annual Maintenance 0% 9.4269 5,000 47,135 4,000 37,708 4,000 37,708

Annual Revenue 0% 9.4269 (3,700) (34,880) (8,000) (75,415) (13,000) (122,550)
Total Operation/Maintenance (PW) Costs, Sub 3 12,255 (37,708) (84,842)
Total Present Worth Life Cycle Costs (LCC) = Sub 1+Sub 2 + 71,670 36,803 9,743
Total Present Worth LCC Saving = PW LCC - Best Choic 61,927 27,061 0
LIFE CYCLE COST (Present Worth Method)
Project: Training Center
PROJECT LIFE CYCLE (YEARS20 1200 SM

DISCOUNT RATE (PERCENT) 10% Build Rent

Initial Costs Est. PW Est. PW

Initial Costs ### 1,200,000 0 0

Total Initial Cost Impact (IC) , Sub 1 1,200,000 0
Replacement/Salvage CostsYear Factor
Repair 5 0.6209 100,000 62,092
Repair 10 0.3855 100,000 38,554 0 0
Repair 15 0.2394 100,000 23,939

Maintenance for all projects

Salvage 20 0.1486 (360,000) (53,511) 0 0

Total Replacement/Salvage PW Costs, Sub 2 71,074 0
Annual costs Escl. % PWA

Annual Maintenance 0% 8.5136 120,000 1,021,628 0 0

Teachin fees & Cateri 0% 8.5136 250,000 2,128,391 375,000 3,192,586
Total Operation/Maintenance (PW) Costs, Sub 3 3,150,019 3,192,586
Total Present Worth Life Cycle Costs (LCC) = Sub 1+Sub 2 + 4,421,093 3,192,586
 Weighted Evaluation
Training Center
Project

Non-Monetary Criteria How Important

A. Flexibilty A 2 points for Major Preference

B. Availability AB B 1 point for Minor Preference

C. Participnats satisfaction A1 B1 C 1 point each for Same preference

D. Mantinablity A2 B1 CD D
E. upgrade servisces A1 B1 CE E1 E Q C V=Q/C
Weight 5 4 2 1 2Weighted LCC Value
Alternatives % 36 29 14 7 14 Criteria Index
Build 4 4 5 3 3
(Rate) X (%) ### ### 71 21 43 393 4.4 88.86
Rent 5 5 5 5 5
### ### 71 36 71 500 3.2 ###
Discount Rate 10%
YearF/P P/F F/A A/F P/A A/P
1 1.1000 0.9091 1.0000 1.0000 0.9091 1.1000
2 1.2100 0.8264 2.1000 0.4762 1.7355 0.5762
3 1.3310 0.7513 3.3100 0.3021 2.4869 0.4021
4 1.4641 0.6830 4.6410 0.2155 3.1699 0.3155
5 1.6105 0.6209 6.1051 0.1638 3.7908 0.2638

6 1.7716 0.5645 7.7156 0.1296 4.3553 0.2296

7 1.9487 0.5132 9.4872 0.1054 4.8684 0.2054
8 2.1436 0.4665 11.4359 0.0874 5.3349 0.1874
9 2.3579 0.4241 13.5795 0.0736 5.7590 0.1736
10 2.5937 0.3855 15.9374 0.0627 6.1446 0.1627

11 2.8531 0.3505 18.5312 0.0540 6.4951 0.1540

12 3.1384 0.3186 21.3843 0.0468 6.8137 0.1468
13 3.4523 0.2897 24.5227 0.0408 7.1034 0.1408
14 3.7975 0.2633 27.9750 0.0357 7.3667 0.1357
15 4.1772 0.2394 31.7725 0.0315 7.6061 0.1315

16 4.5950 0.2176 35.9497 0.0278 7.8237 0.1278

17 5.0545 0.1978 40.5447 0.0247 8.0216 0.1247
18 5.5599 0.1799 45.5992 0.0219 8.2014 0.1219
19 6.1159 0.1635 51.1591 0.0195 8.3649 0.1195
20 6.7275 0.1486 57.2750 0.0175 8.5136 0.1175

21 7.4002 0.1351 64.0025 0.0156 8.6487 0.1156

22 8.1403 0.1228 71.4027 0.0140 8.7715 0.1140
23 8.9543 0.1117 79.5430 0.0126 8.8832 0.1126
24 9.8497 0.1015 88.4973 0.0113 8.9847 0.1113
25 10.8347 0.0923 98.3471 0.0102 9.0770 0.1102

26 11.9182 0.0839 ### 0.0092 9.1609 0.1092

27 13.1100 0.0763 ### 0.0083 9.2372 0.1083
28 14.4210 0.0693 ### 0.0075 9.3066 0.1075
29 15.8631 0.0630 ### 0.0067 9.3696 0.1067
30 17.4494 0.0573 ### 0.0061 9.4269 0.1061

31 19.1943 0.0521 ### 0.0055 9.4790 0.1055

32 21.1138 0.0474 ### 0.0050 9.5264 0.1050
33 23.2252 0.0431 ### 0.0045 9.5694 0.1045
34 25.5477 0.0391 ### 0.0041 9.6086 0.1041
35 28.1024 0.0356 ### 0.0037 9.6442 0.1037
36 30.9127 0.0323 ### 0.0033 9.6765 0.1033
37 34.0039 0.0294 ### 0.0030 9.7059 0.1030
38 37.4043 0.0267 ### 0.0027 9.7327 0.1027
39 41.1448 0.0243 ### 0.0025 9.7570 0.1025
40 45.2593 0.0221 ### 0.0023 9.7791 0.1023
 Quality Base Selection (QBS)
or Weighted Evaluation Matrix (WEM) , or Decision Matrix (DM), or Paired Comparison (PC)

Project

Non-Monetary Criteria How Important

A. A 2 points for Major Preference

B. AB B 1 point for Minor Preference

C. C1 BC C 1 point each for Same preference

D. AD B1 C2 D

E. AE B1 C1 E1 E Q C V=Q/C
Weight 3 4 5 1 2 QualityLCC (SR) Value
% 20 27 33 7 13 Points x 1000 Measure
1 5 4 4 5 5
100 107 133 33 67 440 40 11.00
2 2 2 2 2 2
40 53 67 13 27 200 100 2.00
3 3 3 3 3 3
60 80 100 20 40 300 100 3.00
4 4 4 4 4 4
80 107 133 27 53 400 100 4.00
5 4 5 5 5 5
80 133 167 33 67 480 100 4.80
6 4 4 4 4 4
80 107 133 27 53 400 100 4.00
7 4 4 4 4 4
80 107 133 27 53 400 100 4.00
8 4 4 4 4 4
80 107 133 27 53 400 100 4.00
9 4 4 4 4 4
80 107 133 27 53 400 100 4.00
### 4 4 4 4 4
80 107 133 27 53 400 100 4.00
r Preference
Can it be implemented?

Does it satisfy the basic function?

Same preference
Does comply with Standards, spec, regulations... etc.?

Does it comply with safety standards?

V=Q/C Does have positive impact on other systems?

Value Does it enhance O & M ?
Out of 10 Is materials available ?

10.0

1.8

2.7

3.6

4.4

3.6

3.6

3.6

3.6
3.6
 A B C D E

A 1 1 1 1

B 1 1 0 0

C 0 1 0 0

D 1 1 2 1
E 1 1 1 0
Total 3 4 5 1 2
 Weighted Evaluation
‫اختيار ارضيات لقاعة تدريب‬
Project

Non-Monetary Criteria How Important

A. Safety‫ألمان‬FF‫ا‬ A 2 points for Major Preference

B. Hygiene ‫لصحة‬FF‫ا‬ A1 B 1 point for Minor Preference

C. Ease of O&M ‫لصيانة‬FF‫تشغيل وا‬AC

‫ل‬FF‫ ا‬C1 C 1 point each for Same preference

D. Aesthetics‫ل‬FF‫لجما‬FF‫ا‬ AD BD CD D
E. Sound absorption‫لصوت‬FF‫امتصاصا‬
E1 E1 CE E1 E Q C V=Q/C
Weight 3 1 4 3 4 Quality LCC Value Value Index
Alternatives % 20 7 27 20 27 Points Measure Out of 10
Ceramic 2 3 4 5 1
(Rate) X (%) 40 20 ### ### 27 293 40 7.33 10.0
Carpet 5 5 5 5 4
### 33 ### ### ### 473 80 5.92 8.1
Marble 1 1 1 1 1
20 7 27 20 27 100 100 1.00 1.4
1 1 1 1 1
20 7 27 20 27
1 1 1 1 1
20 7 27 20 27
Rates : (5) Excellent, (4) Very Good, (3) Good, (2) Fair, (1) Poor

Weighted Criteria
Value Index = ---------------------------------
Estimated Cost

Estimated Cost = Life Cycle Cost = Initial Cost + Annual and Periodical costs
 A B C D E
A 0 1 1 1
B 1 1 1 1
C 1 0 1 1
D 1 1 1 1
E 0 0 1 0
Total 3 1 4 3 4