Life Cycle Cost Spreadsheet

Version 1.9, September, 2006, Copyright 2004 by Barringer & Associates, Inc., Humble, TX 77347, USA

For information contact Paul Barringer, P.E., Barringer & Associates, Inc. http://www.barringer1.com hpaul@barringer1.com

This sheet is prepared for simple engineering calculations as an aid for making engineering decisions.
Check with your local accountant for specific details before making financial decisions of great importance.
Paul Barringer, P.E.
Ph: 281-852-6810
FAX: 281-852-3749
Email: hpaul@barringer1.com
Website: http://www.barringer1.com

LCC Worksheet is a simple net present value calculation sheet for your use.
LCC Example 1 is a short problem using Excel Solver (Tools/Solver) to find the maximum allowed capital expenditu
LCC Example 2 is a typical worksheet example for a single alternative.

ble, TX 77347, USA

er1.com hpaul@barringer1.com

reat importance.

e maximum allowed capital expenditure.

Life Cycle Cost Worksheet

Discount Rate (%)-->
12%
$0

Capital Costs:

Project Life (35 yrs max)-->

<--Net Present Value
0

<--Yellow Boxes Are For Data Input

20
Tax Provision (%)-->
<--Internal Rate Of Return
2

Capital Acquisition Costs

Acquisition Costs:

Program Management Costs

Engineering Design Costs
Engineering Data Costs
Spare Parts & Logistics Costs
Facilities & Construction Costs
Initial Training Costs
Technical Data Costs
Documentation Costs
Annual recuring costs
Other periodic costs
Disposal Costs

Savings:
Annual Savings (use positive #s)

NPV & IRR Calculations:

0
1
2
3
Capital equipment
$0
Costs
$0
$0
$0
$0
Savings
$0
$0
$0
Straight Line Depreciation
$0
$0
$0
Profit Before Taxes
$0
$0
$0
$0
Tax Provision @ 38% Of Profit Before Tax
$0
$0
$0
$0
Net Income can be profit or loss
$0
$0
$0
$0
Add Back Depreciation
$0
$0
$0
Cash Flow (Net Income + Depreciation)
$0
$0
$0
$0
Discount Factors @ 12%
1.0000
0.8929
0.7972
0.7118
Present Value
$0
$0
$0
$0
Net Present Value
$0
Internal Rate Return
<--Requires at least one positive and one negative number in the present value row
Year-->

Are For Data Input

Tax Provision (%)-->
-Internal Rate Of Return

38%

10

10

$0
$0
$0
$0
$0
$0
$0
$0
0.6355
$0

$0
$0
$0
$0
$0
$0
$0
$0
0.5674
$0

$0
$0
$0
$0
$0
$0
$0
$0
0.5066
$0

$0
$0
$0
$0
$0
$0
$0
$0
0.4523
$0

$0
$0
$0
$0
$0
$0
$0
$0
0.4039
$0

$0
$0
$0
$0
$0
$0
$0
$0
0.3606
$0

$0
$0
$0
$0
$0
$0
$0
$0
0.3220
$0

e number in the present value row 32

4

10

11

12

13

14

15

16

17

11

12

13

14

15

16

17

$0
$0
$0
$0
$0
$0
$0
$0
0.2875
$0

11

$0
$0
$0
$0
$0
$0
$0
$0
0.2567
$0

12

$0
$0
$0
$0
$0
$0
$0
$0
0.2292
$0

13

$0
$0
$0
$0
$0
$0
$0
$0
0.2046
$0

14

$0
$0
$0
$0
$0
$0
$0
$0
0.1827
$0

15

$0
$0
$0
$0
$0
$0
$0
$0
0.1631
$0

16

$0
$0
$0
$0
$0
$0
$0
$0
0.1456
$0

17

18

19

20

18

19

20

$0
$0
$0
$0
$0
$0
$0
$0
0.1300
$0

18

$0
$0
$0
$0
$0
$0
$0
$0
0.1161
$0

19

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

21

22

23

24

$0
$0
$0
$0
$0
$0
$0
$0
0.1037
$0

20

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

25

26

27

28

29

30

31

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

Exceeds
Project Life

$0

32

33

34

35

Life Cycle Cost Worksheet

Discount Rate (%)-->
12%
$3,109,654

Capital Costs:
Capital Acquisition Costs

Project Life (35 yrs max)-->

<--Net Present Value
0
$3,497,367

<--Yellow Boxes Are For Data Input

20
Tax Provision (%)-->
25.00%
<--Internal Rate Of Return
2

Acquisition Costs:
Program Management Costs
Engineering Design Costs
Engineering Data Costs
Spare Parts & Logistics Costs
Facilities & Construction Costs
Initial Training Costs
Technical Data Costs
Documentation Costs
Annual recuring costs
Other periodic costs
Disposal Costs

Savings:
Annual Savings (use positive #s)

$1,319,500

$1,319,500

$1,319,500

$1,319,500

NPV & IRR Calculations:

0
1
2
3
4
Capital equipment
$3,497,367
Question: How much capital can we afford to
Costs
$0
$0
$0
$0
$0
Given a 20 year project life, 12% discount rat
Savings
$1,319,500 $1,319,500 $1,319,500 $1,319,500
Hint:
Straight Line Depreciation
$174,868
$174,868
$174,868
$174,868
1) Input annual savings of $1,319,500 in the y
Profit Before Taxes
$0 $1,144,632 $1,144,632 $1,144,632 $1,144,632
2) Put $1 in cell D5 for initializing the calculat
Tax Provision @ 38% Of Profit Before Tax
$0
-$434,960
-$434,960
-$434,960
-$434,960
Set the$709,672
iterative process
for Goal Seek to
Net Income can be profit or loss
$0
$709,672
$709,672
$709,672
change$174,868
calculations$174,868
to Automatic
Add Back Depreciation
$174,868
$174,868
3)
Click
on
cell
F3
for
IRR
and notice that it re
Cash Flow (Net Income + Depreciation) -$3,497,367
$884,540
$884,540
$884,540
$884,540
Excel
needs
to
work
on
a formula where a
Discount Factors @ 12%
1.0000
0.8929
0.7972
0.7118
0.6355
4)
Click
on
Tools,
click
on
Goal
Present Value
-$3,497,367
$789,768
$705,150
$629,598
$562,141 Seek
set
cell:
C34
<--remember
this is where
Net Present Value
$3,109,654
to
value:
25%
<--you
can
also
use 0.25
Internal Rate Return
25.00%
<--Requires at least one positive and one negative number in the present value
row 3

by changing cell: D5. <--we start with $1

Click OK and Goal Seek will adjust cell
By convention, the IRR is based on cash flow

38%

te Of Return
5

$1,319,500
5

$1,319,500
6

$1,319,500
7

$1,319,500
8

$1,319,500
9

10

$1,319,500
10

11

$1,319,500

12

$1,319,500

11

h capital can we afford to spend on a project if we save $1,319,500/year?

$0
$0
$0
$0
$0
$0
$0
ect life, 12% discount rate, 38% tax rate, and the internal requirment for a 25% internal rate of return?

12

$0
$1,319,500 $1,319,500 $1,319,500 $1,319,500 $1,319,500 $1,319,500 $1,319,500 $1,319,500
$174,868
$174,868
$174,868
$174,868
$174,868
$174,868
$174,868
$174,868
ngs of $1,319,500 in the yellow boxes of row 19 for each of the 20 years.
$1,144,632 $1,144,632 $1,144,632 $1,144,632 $1,144,632 $1,144,632 $1,144,632 $1,144,632
for initializing the calculations using Excel Goal Seek Tool to find how much capital we can afford.
-$434,960
-$434,960
-$434,960
-$434,960
-$434,960
-$434,960
-$434,960
-$434,960
process for Goal$709,672
Seek to perform
more accurately
by $709,672
clicking on Tools,
Options,
Calculation,
and
$709,672
$709,672
$709,672
$709,672
$709,672
$709,672
Automatic,
place check
mark in Iterations,
change
Max Iterations
= 1000:
Max Change
= 0.0001
$174,868
$174,868
$174,868
$174,868
$174,868
$174,868
$174,868
$174,868
or IRR and notice
that it refers
to the formula
in cell C34--this
important clue
because $884,540
$884,540
$884,540
$884,540
$884,540is an $884,540
$884,540
$884,540
work on a formula 0.5674
where as cell0.5066
F3 only reports
the results.
0.4523
0.4039
0.3606
0.3220
0.2875
0.2567
Goal Seek,
$501,912
$448,135
$400,121
$357,251
$318,974
$284,798
$254,284
$227,039

remember this is where the formula is located

you
also value
use 0.25
er in
thecan
present
row 32
we start with $1 to begin the iterative calculations
Goal Seek will adjust cell D5 = ~$3,497,367 to meet the IRR = 25% with NPV = ~$3,109,654.
RR is based on cash flow (row 30) rather than the present values (row 32).

13

$1,319,500
13
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.2292
$202,714

14

$1,319,500
14
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.2046
$180,994

15

$1,319,500
15
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.1827
$161,602

16

$1,319,500
16
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.1631
$144,288

17

$1,319,500
17
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.1456
$128,828

18

$1,319,500
18
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.1300
$115,025

19

$1,319,500
19
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.1161
$102,701

20

$1,319,500
20
$0
$1,319,500
$174,868
$1,144,632
-$434,960
$709,672
$174,868
$884,540
0.1037
$91,697

########

Life Cycle Cost Worksheet

<--Yellow Boxes Are For Data Input
Discount Rate (%)-->
12%
Project Life (yrs)-->
20
Tax Provision (%)-->
38%
-$125,465 <--Net Present Value
<--Internal Rate Of Return

Capital Costs:
Capital Acquisition Costs

Acquisition Costs:
Program Management Costs
Engineering Design Costs
Engineering Data Costs
Spare Parts & Logistics Costs
Facilities & Construction Costs
Initial Training Costs
Technical Data Costs
Documentation Costs
Annual recuring costs
Other periodic costs
Disposal Costs

0
$75,000

Given a 20 year project life, 12% discount rate, and 38% tax rate.
Equipment cost $75,000. Annual sustaining cost = $12,264/yr. Overhaul cos
costs = $5,000 in year 20.

What is the net present value of the project? NPV=($125,465)

find the most favorable NPV (this often means selection of the
have two negative NPV's from two alternatives, you would select the least ne
positive NPV "delta" between the alternatives.

$12,264

$12,264

$12,264

$12,264

$12,264

Savings:
Annual Savings (use positive #s)

NPV & IRR Calculations:

0
1
2
3
4
5
Capital equipment
$75,000
Costs
$0 $12,264 $12,264 $12,264 $12,264 $12,264
Savings
$0
$0
$0
$0
$0
Straight Line Depreciation
$3,750
$3,750
$3,750
$3,750
$3,750
Profit Before Taxes
$0 -$16,014 -$16,014 -$16,014 -$16,014 -$16,014
Tax Provision @ 38% Of Profit Before Tax $0
$6,085
$6,085
$6,085
$6,085
$6,085
Net Income can be profit or loss
$0
-$9,929
-$9,929
-$9,929
-$9,929
-$9,929
Add Back Depreciation
$3,750
$3,750
$3,750
$3,750
$3,750
Cash Flow (Net Income + Depreciation)
-$75,000
-$6,179
-$6,179
-$6,179
-$6,179
-$6,179
Discount Factors @ 12%
1.0000
0.8929
0.7972
0.7118
0.6355
0.5674
Present Value
-$75,000
-$5,517
-$4,926
-$4,398
-$3,927
-$3,506
Net Present Value
-$125,465
Internal Rate Return
<--Requires at least one positive and one negative number in the present value row 32

10

11

12

13

14

rate, and 38% tax rate.

ng cost = $12,264/yr. Overhaul cost = $20,000 in year 10. Disposal

NPV=($125,465) and must be compared to other alternatives to

eans selection of the LEAST negative NPV). Remember when you
tives, you would select the least negative, and you will then have a

$12,264

6
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.5066
-$3,130

$12,264

7
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.4523
-$2,795

mber in the present value row 32

$12,264

8
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.4039
-$2,495

$12,264

9
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.3606
-$2,228

$12,264
$20,000

10
$32,264
$0
$3,750
-$36,014
$13,685
-$22,329
$3,750
-$18,579
0.3220
-$5,982

$12,264

11
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.2875
-$1,776

$12,264

12
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.2567
-$1,586

$12,264

13
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.2292
-$1,416

$12,264

14
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.2046
-$1,264

15

$12,264

16

$12,264

17

$12,264

18

$12,264

19

$12,264

20

$12,264
$5,000

15
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.1827
-$1,129

16
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.1631
-$1,008

17
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.1456
-$900

18
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.1300
-$803

19
$12,264
$0
$3,750
-$16,014
$6,085
-$9,929
$3,750
-$6,179
0.1161
-$717

20
$17,264
$0
$3,750
-$21,014
$7,985
-$13,029
$3,750
-$9,279
0.1037
-$962