Life Cycle Cost Analysis (LCCA)
Introduction
Life cycle cost analysis (LCCA) is defined as a method or a financial tool to evaluate the total cost of facility ownership, which include time period and discount rate by using discount cash flows. For example: maintenance, user, reconstruction, rehabilitation, restoring, and resurfacing costs. Net present value (NPV) and internal rate of return (IRR) are considered all possible cash flows and they generate financial metrics of LCCA. Life cycle cost analysis is used to evaluate energy efficiency measures (EEMs) for building design and it is only considering the capital and energy costs. A simple payback analysis is defined as “the process of determining the capital cost and energy cost savings of an EEM, and dividing one by the other to determine the number of years it takes for the EEM investment to be repaid” (1). Sometimes a simple payback method is used in lieu of a life cycle cost analysis. By understanding the LCCA process, the concept of a simple payback analysis that is inferior to life cycle cost analysis will be clearly understood. For a set of energy efficiency measures, energy savings and cash flows are determined by the LCCA. Even though this process shows more comprehensive analysis than simple payback, there is more opportunity to develop the accuracy of this analysis. This report is discussing a four-step process for LCCA that targets the realization of all cost saving opportunities:
1- Establish the Baseline.
2- Define the Energy Efficiency Measures (EEMs).
3- Calculate the Financial Metrics.
4- Bundle Measures.
The following points describe the four-step process for life cycle cost analysis
1- Establishing the baseline:
Establishing the baseline is consider...
... middle of paper ...
...rnative is calculated. When the NPV of an alternative is a minimum of 10 % less than the NPV of other competing alternative, the alternative is preferred. When the alternatives are similar or equivalent, the difference between the NPV of alternatives will be less than 10 %. The sensitivity analysis should examine the effect of variability in the main input parameters for the analysis of the overall results. The most significant parameters that should be tested for sensitivity in the analysis are the discount rate, timing of future rehabilitation activities, traffic growth rate, unit costs of the major construction components, and analysis period.
7- Re-evaluate design strategies if needed
Figure 2 illustrates the LCCA structured approach.
Figure 2: LCCA Process Flowchart
References:
1-
2- http://accountingexplained.com/managerial/capital-budgeting/npv
LEED, or Leadership in Energy & Environmental Design, is a certification program for green buildings with stringent requirements for building energy efficient and environmentally responsible structures. Some requirements of this program include specific building materials, smart grid capable, gray water reclamation systems, green space minimums, high levels of insulation and low thermal transfer glass (US Green Building Council). Green buildings are a must if we are to sustain our current level of growth. Despite the higher initial cost of these buildings, the long term energy savings make these buildings a smarter choice for
For one, if there is a low-end estimate on the cost of renovation and equipment, then the Build option’s NPV goes up to $903,489, a $498,351 increase over the base case’s NPV of $405,138. However, it would be unfair to compare this figure to the base case NPV for the Lease option, and indeed in comparison to the low-end estimate for the cost of renovation and equipment in the Lease option, the Lease option has the better NPV ($924,173). When examining the converse situation (high-end estimate), the Lease option still has a better NPV than the build
This analysis shows that the projects NPV as 13.37 million dollar. Our result is slightly different than the presenting team because of rounding. But both of our teams had positive NPV which suggest that the project should be accepted.
As a college student, you are required to make decisions all the time. These decisions differ in there level of seriousness and way it can affect you as an individual and how they may affect your academic performance. I came to college as an athlete, and my choice to be a college athlete meant my life would be different from traditional students. The rigor of my sport meant i would have weights every morning, and practice in the afternoons. It meant I would have to miss class to travel for games but that is what I signed up for.
Analyse the relationship between the product life cycle and cash flow. The product life cycle is split into 5 stages. * Research and development * Introduction * Growth * Maturity / Saturation * Decline The product life cycle is the model that represents a sales pattern.
Adjacent to perceiving criminological theories that assistance and complexity from the program or fundamental thought, it is similarly pressing to examine and grasp if the program or theories is reinforced by more broad research. There is an article recorded inside a movement of booklets focused on wrongdoing suspicion in the Australian Institute of Criminology that was created by Wilson and Geason (2016). An immense portion of the article's exchange recognized the centrality of wrongdoing foresight and some choice strategies to sending these intercession programs viably. There was a proposition by Wilson and Geason (2016), the 'situational wrongdoing neutralizing activity'. The representation of intervention lays towards the assumption that offenders are ordinary pioneers, however, in the
It is important to clarify some key assumptions that were made in valuing the properties to this NPV. First, the project yields a high IRR of 73 %, due largely in part to the sale of each building upon lease up. For the cash flow projections, it was assumed that all buildings are sold 18 months after construction completion. Therefore, with the exception of the last building to be sold, Heron Quay, the buildings are sold toward the end of their free-rent periods and no rent is collected.
Whether you are considering building new or simply renovating, there are many verdant options that a company can use to reduce expenses. There is a price difference present between the costs of traditional and eco-friendly building materials. Typically these costs contribute about 2-3% towards the increase on price when choosing to use green building materials (Lawson, 2009). At first you think 2 - 3%, really is not significant at all, however if you consider many of the larger companies easily spends upwards of 5 – 6 million dollars on new constructions. That is quiet a magnitude of money; ranging anywhere from $100,000 – $180,000 in extra investments, depending on the options that are chosen.
Sensitivity analysis is the study of how the uncertainty in the output of a mathematical model or system (numerical or otherwise) can be apportioned to different sources of uncertainty in its inputs. A related practice is uncertainty analysis, which has a greater focus on uncertainty quantification and its propagation. Ideally, uncertainty and sensitivity analysis should be run in tandem. As the optimization method provides the best set of inputs for optimum output, the input parameters are different at all the times and a superlative situation may not be rewarded. Some of the input factors may have sparing effect on the output on the contrary others have dominating effect. Though this situation is not prevalent in ideal situation, it is strongly recommended to check the most dominating input parameter which will have impact on output. This will strengthen the understanding of the manufacturing firm regarding where control is required. To cater this need sensitivity analysis is carried out using MS frontline solver 12.5 for regression and dimensional analysis.
With the rise of students wanting to further their education comes the rise of schools increasing their tuition rates and fees. How does this affect many that have a hard time with keeping employment and or anyone for that matter? The question remains will tuition increasing effect the number of student attending universities like NSU?
(Donnelly. B., 2016) has stated that even though a building has a lifespan of 60-120 years, it still has to construct, demolish and maintain in order to preserve its appeal and new design. Every time a building is reused, by choosing for refurbishing rather than demolishing and rebuilding the structure then a large amount of energy is being saved by avoiding the need to extract raw materials and convert them into a replacement building. The benefits of reusing and renovating buildings exceed the benefits of the construction of new energy-efficient structures. According to the study, a new building that is 30% more efficient than the average building takes 10 to 80 years to overcome the negative climate change impacts resulting from construction. Refurbishing allows a large amount use of energy is saved since the need to source raw materials and eventually transforming them into a new building is avoided. (Building.com 2012). At the same time creating a new building takes a lot of time compared to refurbishing. Also renovating only needs a less effort and takes a less time and permission may not be
The product I have chosen is Pepsi, which is a carbonated soft drink produced and manufactured by PepsiCo. It is one of the world's leading food and beverage companies with over billions of dollars in profit.
Coca Cola faces many costs when producing their products. These cost are usually categorized into variable costs and fixed costs. Variable costs are costs that vary depending on production output. Some examples of variable costs that Coca Cola incurs include labor, raw materials, packaging, and transportation and deliver cost. Raw materials are a major variable cost for Coca Cola. When production increases more materials are need to product more product therefore the cost for raw materials increases. The main raw material in all Coca Cola products is sugar which includes high fructose corn syrup, sucrose, and sugarcane. The availability of these natural resources often depend on weather conditions making for fluctuations
Kats, G., Alevantis, L., Berman A., Perlman J., & Mills, E. (2003, October). The Costs and Financial Benefits of Green Buildings: A Report to California’s Sustainable Building Task Force. Retrieved from http://www.usgbc.org/Docs/News/News477.pdf
Although balancing between mitigation and adaptation strategies is still considered in international and national level in different sectors, it displays some important linkages in project level in building sector. IPCC TAR concluded appropriate optimization between mitigation and adaptation will be long and boring process and optimum mix of response options will be vary by time and country (place) as local condition and cost modify (Richard J.T. Klein et al., 2003). Some central shortcoming of optimizing mitigation and adaptation strategies in the project level are, namely, Uncertainty, irrespective of the diversity of economic values and preference within and between society, Equity or fairness for distributional cost of impacts (burden sharing), local conditions. Richard J.T. Klein et al. (2003) state in absent of perfect information, a number of alternative mixes of mitigation adaptation and mitigation strategies may be proposed which different in their economic, social and environmental impacts. For instance, while one option may be equitable and environmentally suitable, it might be cost-effective than other options, although be less environmentally and socially acceptable. These authors present to identify which mix or mixes of options are justifiable, some multi-criteria framework needs to be designed with which one can capture, quantify and compare the direct and dependent effects of application of each these or other possible criteria.