D.

7 Life Cycle Cost Calculations

For cost comparison, amortization of first cost and the present worth of life
cycle operating costs shall be calculated and combined, as follows, to obtain
the present worth and annual owning and operating costs of each system.

Public Law 95-619 requires that life cycle cost analyses for federal projects
conform to procedures set forth by the DOE. The following factors are used
for the life cycle cost analysis:

• Interest (discount) rate of 7% for future costs

• Zero inflation factor for all future costs other than fuel

• Fuel inflation factors as determined by the DOE in the latest

supplement to NIST Handbook 135 that represents the extra inflation
of fuel over general costs. The fuel inflation factors can be expressed
and used as modified uniform present worth (UPW) discount factors
which, when multiplied by the first-year fuel costs, give the present
worth of a series of escalating annual fuel costs. These factors are
published for four Census regions.

Total “present” worth is equal to the sum of the first (construction) cost and
the present worth of maintenance, replacements, utilities, electricity, and fuel
payments for 30 years. All of the above “present” worth should be based
upon appropriate construction schedules.

The annual equivalent cost is the payment that will amortize the total present
worth in years at the given interest rate using a capital recovery factor (CRF)
cost. Taxes or insurance are not included in the annual owning cost.

7/28/00
Mechanical D-14