Life cycle costing is now a fundamental part for many FM decisions. The Facilities Manager plays an important role in providing advice regarding the commissioning of building facilities. You are now the Facilities Manager of a property developer who owns a number of high class shopping arcades (e.g. IFC mall and Pacific Place). Your company is looking for long term stable rental income and up-market image. You are now asked to advise the Board of Directors on which is the more acceptable of two possible alternative LED lighting systems put forward by an E&M consultant. The consultant has provided you with the following information: System A $6,200,000 4 years $210,000 p.a. System B $7,500,000 4 years $100,000 p.a. $750,000 p.a. $600,000 p.a. $125,000 p.a. $85,000 p.a. Initial cost Expected life Repairs Electricity consumption Staff related costs p.a. per annum The cost of funds to this company is 5.5% p.a. and there is NO residual value at the end of the product life. Making any other relevant assumptions, prepare a life cycle appraisal of the two options using Discounted Cash Flow and Net Present Value. Give your explanation to the Board of Directors as to which system is better to the company. The following tables about Present Values will be useful in your calculation. 0 year Present Value of $1 @ 5.5% 1.000 1 year 0.948 2 year 0.898 3 years 4 years 0.852 0.807