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					Life Cycle costing
Q. Use the Present Worth Method to determine the Total Cost ( LCC )
   of the three alternatives below
1. Three projects                                    30 years
                                              Lif span =
                                          Interest = 10%
                                        Escalation = 0%

                                 Item                 Project Project Project
Construction cost                                       A       B       C
                                                      55,000 70,000 90,000
Repair and spare parts for project A at year 7          5,000
Repair and spare parts for project B at year                              7,000
Repair and spare parts for project C at year                                          8,000
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 (YEARS)          30
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 Costs            Year     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 + Sub 3      71,670                          36,803                         9,743
Total Present Worth LCC Saving = PW LCC - Best Choice                  61,927                          27,061                   Best Choice
LIFE CYCLE COST (Present Worth Method)
Project:   Training Center
PROJECT LIFE CYCLE (YEARS)          20                 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 Costs            Year     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 & Catering                  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 + Sub 3     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    2 Weighted        LCC       Value

     Alternatives             %       36 29 14     7 14 Criteria                    Index
     Build                             4   4   5   3       3

                       (Rate) X (%) 143 114    71 21 43         393          4.4 88.86
     Rent                              5   5   5   5       5

                                      179 143 71 36 71          500          3.2 #####
Discount Rate       10%
Year F/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   109.1818   0.0092    9.1609    0.1092
 27   13.1100    0.0763   121.0999   0.0083    9.2372    0.1083
 28   14.4210    0.0693   134.2099   0.0075    9.3066    0.1075
 29   15.8631    0.0630   148.6309   0.0067    9.3696    0.1067
 30   17.4494    0.0573   164.4940   0.0061    9.4269    0.1061

 31   19.1943    0.0521   181.9434   0.0055    9.4790    0.1055
 32   21.1138    0.0474   201.1378   0.0050    9.5264    0.1050
 33   23.2252    0.0431   222.2515   0.0045    9.5694    0.1045
 34   25.5477    0.0391   245.4767   0.0041    9.6086    0.1041
 35   28.1024    0.0356   271.0244   0.0037    9.6442    0.1037
36   30.9127   0.0323   299.1268   0.0033   9.6765   0.1033
37   34.0039   0.0294   330.0395   0.0030   9.7059   0.1030
38   37.4043   0.0267   364.0434   0.0027   9.7327   0.1027
39   41.1448   0.0243   401.4478   0.0025   9.7570   0.1025
40   45.2593   0.0221   442.5926   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
                                              Weight     3       4       5      1          2 Quality LCC (SR)
                                                   %   20 27 33                     7 13           Points   x 1000

 1                                                          5       4       4       5         5

                                                        100     107     133     33         67       440        40
 2                                                          2       2       2       2         2

                                                         40     53      67      13         27       200      100
 3                                                          3       3       3       3         3

                                                         60     80      100     20         40       300      100
 4                                                          4       4       4       4         4

                                                         80     107     133     27         53       400      100
 5                                                          4       5       5       5         5

                                                         80     133     167     33         67       480      100
 6                                                          4       4       4       4         4

                                                         80     107     133     27         53       400      100
 7                                                          4       4       4       4         4

                                                         80     107     133     27         53       400      100
 8                                                          4       4       4       4         4

                                                         80     107     133     27         53       400      100
 9                                                          4       4       4       4         4

                                                         80     107     133     27         53       400      100
10   4     4     4    4    4

     80   107   133   27   53   400   100
w Important
s for Major Preference               Can it be implemented?

 for Minor Preference                Does it satisfy the basic function?

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



                 11.00       10.0

                  2.00        1.8

                  3.00        2.7

                  4.00        3.6

                  4.80        4.4

                  4.00        3.6

                  4.00        3.6

                  4.00        3.6

                  4.00        3.6
4.00   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.   Safety ‫األمان‬                        A                       2       points for Major Preference

B.   Hygiene ‫الصحة‬                       A1     B                 1       point for Minor Preference

C.   Ease of O&M ‫ التشغيل والصيانة‬AC C1 C                         1       point each for Same preference

D.   Aesthetics ‫الجمال‬                   AD BD CD           D

E. Sound absorption ‫ امتصاص الصوت‬E1 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 20 107 100 27                    293       40        7.33          10.0
     Carpet                                5      5     5     5       4

                                         100 33 133 100 107                   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

   A        0   1

   B    1       1

   C    1   0

   D    1   1   1

   E    0   0   1

Total   3   1   4
D   E

1   1

1   1

1   1

    1

0

3   4

				
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posted:11/11/2011
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