2% TASK C: Util Wk 4 Example LCCA Heating/ AC System Bid Comparison

A small office building is heated, and air conditioned with a forced air system and
it is time to replace the system. The owner has received 3 bids as noted below.
Which bid is the best buy based on an LCCA calculation?

Service Life of systems is 18 years.

Interest/Discount rate 4.00%

Use the chart below to calculate the LCCA and select the best buy.

Bid 1 Bid 2 Bid 3

Mid efficiency furnace with an High efficiency system with an Economy furnace with an 18
add-on SEER 13 AC system Add-on 10 SEER AC system SEER AC system

Capital cost $12,000 Capital cost $14,500 Capital cost $ 17,600

Annual Operating cost Annual Operating cost Annual Operating cost

Heating: $1,600.00 Heating $1300.00 Heating $2,100.00

A\C: $2,000.00 A/C $1750.00 A/C: $1,100.00

Annual Maintenance $150.00 Annual Maintenance $175.00 Annual Maintenance $250.00

Annual Replacement $125.00 Annual Replacement $135.00 Annual Replacement $330.00

Salvage: Gain or Cost Salvage: Gain or Cost Salvage: Gain or Cost

$325.00 $350.00 $600.00
Recommendation Recommendation Recommendation
2% TASK C: Util Wk 4 Example LCCA Heating/ AC System Bid Comparison
18 years @ 4% results in a: Single Payment Present Worth Factor of 0.4936

Uniform Series Present Worth Factor of 12.659

Bid #1:

Capital Cost = $12,000

Annual Operating Cost:

Heating = $1,600 X 12.659 = $20,254.4

A/C = $2,000 X 12.659 = $25,318

Annual Maintenance Cost = $150 X 12.659 = $1,898.85

Annual Replacement Cost = $125 X 12.659 = $1,582.375

Salvage = $325 X 0.4936 = $160.42

Life Cycle Cost = $61,214.045

Bid #2:

Capital Cost = $14,500

Annual Operating Cost:

Heating = $1,300 X 12.659 = $16,456.7

A/C = $1,750 X 12.659 = $22,153.25

Annual Maintenance Cost = $175 X 12.659 = $2,215.325

Annual Replacement Cost = $135 X 12.659 = $1,708.965

Salvage = $350 X 0.4936 = $172.76

Life Cycle Cost = $57,207

Bid #3:

Capital Cost = $17,600

Annual Operating Cost:

2% TASK C: Util Wk 4 Example LCCA Heating/ AC System Bid Comparison
Heating = $2,100 X 12.659 = $26,583.9

A/C = $1,100 X 12.659 = $13,924.9

Annual Maintenance Cost = $250 X 12.659 = $3,164.75

Annual Replacement Cost = $330 X 12.659 = $4,177.47

Salvage = $600 X 0.4936 = - $296.16

Life Cycle Cost = $65,154.86

Based on the LCCA calculations, bid #2 is the cheapest one because it has a life cycle cost of only
$57,207. Therefore, the owner should buy the second bid.