Question 3: LCC For this problem, you will need to refer to the class notes as well as the supplemental readings under Life Cycle Costing

Assume the construction start date is January 2019. You are a manager choosing between two designs for new capital facilities. Given the facts below, calculate the LCC for each alternative and make a recommendation.

For each alternative:

The time horizon is 30yrs. Real interest rate is 3% Nominal interest rate is 7% Assume the cash flows are EOY cash flows and happen once per year starting at year 1. Each alternative has a construction duration of 2 years. The construction starts at January 2019. Construction costs incurs as equivalent uniform annual cost over the construction duration. The building location is in Texas. There is no salvage value for each alternative design. *Note. Salvage value is NOT residual value check notes The bank is providing a loan at 8% compounded annually for the construction costs. o There are no payments on the loan during the construction period. o You must pay pack the loan in 15 equal installments starting at year 3. The loan finance rate will be 8%.

Alternative One Construction cost is $4 million USD, including Energy usage is natural gas and electrical: o Projected annual natural gas use is $16,500 o Projected annual electricity use is $7,000 The mechanical system has the following parameters: o Lifespan is 35 years starting at the service date (The first use is incurred at year 3, because it has been in service for 1 year.) o Initial cost is $350,000 (which is included in the $4 million construc

Question 3: LCC For this problem, you will need to refer to the class notes as well as the supplemental readings under Life Cycle Costing Assume the construction start date is January 2019. You are a manager choosing between two designs for new capital facilities. Given the facts below, calculate the LCC for each alternative and make a recommendation. For each alternative The time horizon is 30yrs. Real interest rate is 3% Nominal interest rate is 7% Assume the cash flows are EOY cash flows and happen once per year starting at year l * Each alternative has a construction duration of 2 years. The construction starts at January 2019 . Construction costs incurs as equivalent uniform annual cost over the construction duration. . The building location is in Texas " There is no salvage value for each alternative design. *Note. Salvage value is NOT residual value check notes The bank is providing a loan at 8% compounded annually for the construction costs. . o There are no payments on the loan during the construction period. o You must pay pack the loan in 15 equal installments starting at year 3. The loan finance rate will be 8%. Alternative One Construction cost is $4 million USD, including *Energy usage is natural gas and electrical o Projected annual natural gas use is $16,500 o Projected annual electricity use is $7,000 The mechanical system has the following parameters Lifespan is 35 years starting at the service date (The first use is incurred at year 3, because it has been in service for 1 year.) Initial cost is $350,000 (which is included in the $4 million construction cost) o o Operations and maintenance are S125,000 per year (not including energy) Question 3: LCC For this problem, you will need to refer to the class notes as well as the supplemental readings under Life Cycle Costing Assume the construction start date is January 2019. You are a manager choosing between two designs for new capital facilities. Given the facts below, calculate the LCC for each alternative and make a recommendation. For each alternative The time horizon is 30yrs. Real interest rate is 3% Nominal interest rate is 7% Assume the cash flows are EOY cash flows and happen once per year starting at year l * Each alternative has a construction duration of 2 years. The construction starts at January 2019 . Construction costs incurs as equivalent uniform annual cost over the construction duration. . The building location is in Texas " There is no salvage value for each alternative design. *Note. Salvage value is NOT residual value check notes The bank is providing a loan at 8% compounded annually for the construction costs. . o There are no payments on the loan during the construction period. o You must pay pack the loan in 15 equal installments starting at year 3. The loan finance rate will be 8%. Alternative One Construction cost is $4 million USD, including *Energy usage is natural gas and electrical o Projected annual natural gas use is $16,500 o Projected annual electricity use is $7,000 The mechanical system has the following parameters Lifespan is 35 years starting at the service date (The first use is incurred at year 3, because it has been in service for 1 year.) Initial cost is $350,000 (which is included in the $4 million construction cost) o o Operations and maintenance are S125,000 per year (not including energy)