Total Cost of Ownership (TCO) Includes three major cost components Acquisition - the cost to acquire and make the system operational Operation - the cost to operate and maintain the system Disposition - the cost to cease operations and to dispose of assets Case description A new RFID-based inventory system requires a server ($15k), RFID reader ($3.7k), RFID inventory software ($75k), RFID tags ($1.75 ea in lots of 100). Installation costs are $30k Maintenance costs are 1 full time equivalent (FTE) operator/technician at $40k/year plus a 35% overhead burden. Software licensing $8k/yr. Cost to remove the system is $2.6k. Assume a 3 year useful life. . Year 1 the warehouse will process 30,000 units requiring tracking with 10% annual growth. Benefits year 0: 75,000, year 1: 100,000, year 2: 200,000 & year 3: 300,000 Discount rate 3.5%