| Financial analysis: |  |
| Environmental impact analysis: | --- |
| Waste management/P2: | --- |
| Environmental cost listing/database: | --- |
| Cost estimation: | --- |
| Alternative product/process comparison: | |
| Financial analysis: | |
| Environmental impact analysis: | --- |
| Waste management/P2: | --- |
| Environmental cost listing/database: | --- |
| Cost estimation: | --- |
| Alternative product/process comparison: | |
Cost benefit analysis of life-cycle costs for material selection. Life-cycle costs of materials other than stainless steel can also be compared, which can form a component of an environmental project. The system cannot take all life-cycle stages and costs into account. Not meant to compare project costs. Both large and small project data may be analyzed. However, cost details cannot be shown and the program cannot handle calculations that involve over 9 digits. There may be a practical limit on the time horizon that can be covered. Twenty to 100 years is typically used.
This LCC program assesses the potential long-term costs and benefits against short-term expediency, when making materials selection. The program compares likely lifetime costs of up to three material alternatives in present value terms. The program functions include the following:
The sensitivity analysis can view effects on total costs of changing the base case values of primary input variables by selected percentages. The results are displayed in Mu's (monetary units). The tool does not allow any qualitative information to be entered. The program converts all costs (other than initial costs) to present values, to calculate total life-cycle costs in present value terms. The software does not limit the length of the life cycle as long as the total LCC figure does not exceed 9 digits.
| Raw material acquisition | --- |
| Manufacturing stage | --- |
| Use/reuse/maintenance | |
| Recycle/waste management | |
The system is not designed to consider all than one life-cycle stages. A different definition of life-cycle costing is used here. It is defined as the total costs of a project from the initial outlay through all related future costs (maintenance, replacement and other operations) that may be incurred as a consequence of the initial investment decision. Thus it focuses on just one life cycle stage-typically the use/reuse of a particular material and the initial cost.
| Conventional | |
| Potentially hidden | |
| Contingent | --- |
| External | --- |
The tool is designed to consider conventional and hidden costs (e.g., maintenance, replacement) associated with an investment decision. The system does not consider all potentially hidden, contingent, or external costs associated with different material alternatives.
Since users enter only total values, they can make operating cost inputs more comprehensive (if they so desire) by including waste management and other environmental costs. Alternatively, they may be able to estimate the percentage impacts, for instance, of liability or waste management costs on the operating costs. These impacts can be analyzed in the sensitivity analysis (limited, however, to values between 1% and 99%). The program allows costs to be broken down only to a certain extent, which may force users to lump certain cost categories together. Users have to set up a single value for downtime periods for maintenance and repair.
The program calculates life-cycle costs as
Life-Cycle Cost (LCC) = Initial materials acquisition costs + Initial material installation and fabrication costs + Present Value (PV) of operating and maintenance costs + PV of lost production costs during downtime + PV of replacement materials costs.
Users first need to enter the following information:
Details need to be entered for downtime per maintenance/replacement event, value of lost production per day and initial total (per unit) material costs, fabrication and installation costs, other installation costs, maintenance costs, replacement costs, and annual material-related costs (indirect operating costs). Users also need to estimate the number of maintenance/replacement events and elapsed time between them. They can take into account the residual or scrap value of material after replacement.
The program calculates the following:
It performs sensitivity analysis using percentages that can be selected between 1% and 99%.
Costs should be entered as per-unit values, which are later multiplied by the number of units to obtain overall costs. The inflation rate is always assumed to be less than the cost of capital.
| Net present value (NPV) | --- |
| Payback period | --- |
| Internal rate of return (IRR) | --- |
| Benefits cost ratio | --- |
| Other | |
The program discounts all cash flows to get PVs, which can then be used as a basis for comparison. The program takes material, fabrication, and installation and other installation costs as initial costs and therefore does not discount them. These are taken as total initial costs. Using the real interest rate and the PV formula, the program calculates PVs for maintenance costs, replacement costs, cost of lost production, and annual material related costs. However, users cannot enter values for benefits. Thus the program does not compute NPVs.
Users do not have to enter data for all input prompts, although the study would be more comprehensive if they did. There really is no other avenue for modifying or customizing the program. The guide warns that the calculated real interest rate can sometimes be too high for projects with long time periods. Appropriate adjustments need to be made to the chosen cost of capital. The program has a help menu that assists with input definitions and program functions. The program gives an error message for inconsistent values.
The program is suitable for preliminary analysis of material alternatives. The program does not support cost estimation or the input of detailed cost data. Total costs have to be estimated elsewhere before input into the program, which performs the financial analysis. Also, the program only calculates the PV of costs not net benefits. Users receive no information on estimating the life-cycle costs included (e.g., maintenance or replacement costs). However, the tool can be utilized along with cost estimating systems to perform financial analyses.
The program does not export/import data from elsewhere. This is not a major limitation because it does not call for large inputs. The program inputs for material costs are divided into 1) plate, sheet; 2) pipe, tube, fittings; and3) bar and other. Thus the input prompts are tailored toward selecting steel and related substitutes. This may limit the types of materials that users want to consider, unless they choose to ignore the category names. The program cannot support calculations that have greater than 9 digits. This can be a problem with, for example, long life cycles and high operating costs. This is not meant to be a commercial product and hence no user support is provided (beyond minor inquiries).
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