PRJM6001 PROJECT COST MANAGEMENT – LIFE CYCLE COSTING
how to calculate the PVF if the chosen/calculated DR is not a whole number
If this occurs use the following formula:
where r = rate of return (or DR) eg 4% = 0.04
n = number of years (ie 1 – 6)
To understand and apply the processes for life cycle costing.
You are contemplating the purchase of a new SUV for family use. You are to choose a new model and perform a Life Cycle Costing calculation using the Net Present Value method to determine its life cycle costs, over a period of 6 years. The vehicle is NOT to be purchased by leasing or by loan. As the SUV is for private use only you should ignore any tax implications in your life cycle costing, but must consider the resale value.
As a minimum you must provide the following information:
? a detailed description of ALL your assumptions
? a detailed explanation and breakdown of all costs and values used in your costing (do NOT use published all-inclusive rates per kilometre for running expenses)
? sources for ALL the data used (with sources, properly referenced or screen shots).
? a comprehensive explanation (with sources, properly referenced or screen shots) for your choice of discount rate and method for handling inflation
? a single A4 spreadsheet for the LCC which shows all the relevant costs and values for the full life cycle as well as the discounting calculations. The spreadsheet is to be in landscape layout, titled and use the following general layout for information:
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