Type of Cost
Cost Examples
Present Value Relationships
Comments
Service or maintenance
PV = TV(UPW*)
The present value of such
Annually Recurring
Escalating
which involve increasing
where
costs are calculated by
n
[ ]
(1+e)
1
amounts of work
using a modified version
(1+d)
Frequent replacements
UPW*=
of the UPW formula (UPW*)
(1+d)
1
that escalate at a rate
which allows for cost
(1+e)
different than inflation
escalation.
n
1+e
( )[ ( )]
1+e
or UPW*=
1
d-e
1+d
Energy
Fuel related costs, such as fuel
PV = TV(UPW*)
Energy related UPW* factors
oil, natural gas or electricity
are found in the NIST
BLCC program.
Escalation Rates
Relating Budgetary
E = e + I + eI
Needed to convert budgetary
Escalation to Real Growth
or e = E-I
escalation to real growth
Escalation
1+ I
escalation.
Definitions
FV = future value
PV = present value
TV = today's value
d
= real discount rate
e
= real growth escalation rate (the differential escalation rate that exists
after removing the influence of general inflation)
n
= number of years to occurrence or the analysis period, as appropriate
E
= Budgetary Escalation
I
= Inflation Rate
UPW = Uniform Present Worth factor for fixed recurring costs
UPW* = Modified Uniform Present Worth factor for escalating recurring costs
25
GENERAL
REQUIREMENTS
1.8
Life Cycle Costing
Revised March 2005 PBS-P100
Previous Page
