Question $2$: LCC

Assume the date is January $2014.$ You are a manager wanting to know the lifecycle cost of a new energy$-$conserving facility$-$you want to decide where to build this facility

The study period is $25yrs.$

Real rate is $3\%$

Nominal rate is $6\%$

The bank is providing a loan$-$irrespective of location$-$ at $8\%$ compounded annually for the construction costs.

You must pay back the loan in $15$ equal installments starting at year $5.$

ALTERNATIVE $1$

Building is in Utah

Construction duration is $2$ years

Construction cost is $$5\mathrm{.}5$ million USD

Energy Prices:

Fuel type: Electricity at $$\frac{0\mathrm{.}08}{k}Wh,$ local rate as of base date

Rate type: Industrial

Projected annual Electricity: $600,000kWH$

An energy rebate at the service date is provided for $$10,000$

Water use:

$$20,000$ per year

Water system must be replaced every $20$ years $($lifespan$)$ for $$40,000$

Mechanical system:

Lifespan is $6$ years starting at the service date

Cost is $$60,000($original is included in the construction cost$)$

Salvage value is estimated to be $$2,000$

Annual O&M costs: $$8,000$