An Overview Of Life-Cycle Cost Analysis Page 4
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21Why should we care?
• Two common methods to select from alternatives
1) Focus on up-front costs only
2) Simple payback
• Pros
– Easy to calculate, understand
• Cons
– Lack of discounting (not taking account of time value of
money, and timing of costs)
– (Possible) failure to include price escalations (e.g. energy,
water)
– No accounting for differences in equipment lives
– No accounting for anything beyond payback period
– Easy to make sub-optimal choice!
4
Energy Exchange: Connect • Collaborate • Conserve
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