Worked Example: Gold Creek Facility Improvement

Perform a Life Cycle Cost Analysis Projection for five candidate improvements suggested at Gold Creek Facility for the Budget year 2012-2013.

The Worked Example spreadsheet can be found here.

Figure 1 below shows the initial input data for alternatives to be analyzed.

Figure 2 below shows the detailed outlay of capital, operations and maintenance, renewal and disposal costs for Option 3. The costs are entered against a defined line item in the expected year to be expended starting from column E in the spreadsheet and going right.

Once the cost data is entered similarly for all five options shown in Figure 1, a plot that shows the annual and cumulative life cycle costs for all options being analyzed is generated in its respective tab. For example, Figure 3 allows for a quick review of the data that has been entered into the spreadsheet for Option 3.

Figure 4 shows the Summary Analysis tab for the Gold Creek Facility Improvement project with key data summarized from all the alternatives.

In addition to the Project Analysis Summary tab, plots of cumulative costs and average annual costs for each analyzed Option are generated in separate tabs as shown in Figures 5 and 6 respectively.

Based on the results shown in Figures 4 and 6, since we are seeking to minimize costs, the Option with the lowest average PV cost is “Status Quo.” If a selection is to be made ignoring the “do nothing” option, since “Replace with Plan A” has the next lowest average PV cost, it should be chosen as the lowest life cycle cost alternative for the Gold Creek Facility Improvement project from a purely life cycle cost analysis perspective, all things being equal.