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5-Life Cycle Costing PDF
5-Life Cycle Costing PDF
5-Life Cycle Costing PDF
Initial Cost
Disposal Operational
Cost Life Cycle Cost
Cost
Analysis
Occupancy Maintenance
Cost Cost
1
1. Construction
2. Maintenance costs
Construction works costs
Other construction related costs Replacement
– Design fees, Planning costs, planning Refurbishment and adaptation
gain contributions etc
Redecorations
Maintenance
2
LCC CALCULATING PROCES
5. End of life costs Identity cost element
Value of an Annuity
NPV = PV (Cash inflow – Cash outflow)
3
DISCOUNT RATE CALCULATING LCC
– Refers to the rate of change of true value of
LCC = I+ Repl+ E+ OM & R + O – Res
money over time, considering fluctuations in both
investment interest rates and the rate of inflation • I - Present value of initial cost
• Repl - Present value of replacement cost
– Discount rate is approximately equal to the interest • E - Present value of energy cost
rate (cost of capital) minus the inflation rate • OM & R - Present value of non energy
operation, maintenance and repair cost
– More accurately calculated by 𝑟 = ( − 1)
• O - Present value of other costs
– r = real discount rate, d = interest rate, i = rate of
• Res - Present value of residual value
inflation
less disposal cost
Example 1: Example 2:
A client seeks your advise on a cladding for his A client seeks your advise on a floor finish for his
building based on following information. building based on following information.
Information Cladding A Cladding B
Information Type A Type B
Initial cost 10 Mn 12 Mn
Initial cost 200 Mn 300 Mn
Redecorating cost 2 Mn @ every 4 years -
Cleaning cost 7.5 Mn @ every 05 7.5 Mn @ every 06
Renewal Cost 3 Mn @ every 10 years - years years
Maintenance cost - 2.5 Mn @ every 10
Cost for Repair - 6 Mn (at 10th Year) years
Life Span 15 30
Resale value - -
4
Example 3:
A client seeks your advise on a LCC of two projects
based on following information. ADVANTAGES OF LCC
Information Project A Project B
• Evaluation of competing options in purchasing
Initial cost 200 Mn 200 Mn
• Improved awareness of total costs
Maintenance cost 15 Mn @ every 05 18 Mn @ every 10
years years
Annual energy cost 20 Mn 22 Mn
• More sensible than other methods
DISADVANTAGES OF LCC
• LCC is time consuming
• LCC involves lot of effort in calculations
• The assumption is that the product, as known, has
a finite life-cycle THANK YOU
• The accuracy of data is often doubtful
• It has a high sensitivity to changing requirements