An international aerospace contractor has been asked by a municipal police department to estimate and analyze the life cycle costs for a proposed drone surveillance system to monitor traffic patterns and congestion within the central thoroughfares of the city. The list of items include the following general categories: R&D costs (R&D), nonrecurring investment costs (NRI), recurring investment costs (RI), scheduled and unscheduled maintenance costs (Maint), equipment usage costs (Equip), and disposal costs (Disp). The costs (in $ million units) for the 20-year life cycle have been estimated. Calculate the annual LCC at an interest rate of 7% per year.
What will be an ideal response?
PW of LCC = -6.6 – 3.5(P/F,7%,1) – 2.5(P/F,7%,2) – 9.1(P/F,7%,3) – 18.6(P/F,7%,4)
- 21.6(P/F,7%,5) - 17(P/A,7%,5)(P/F,7%,5) –
14.2(P/A,7%,10)(P/F,7%,10)
- 2.7(P/A,7%,3)(P/F,7%,17)
= -6.6 – 3.5(0.9346) – 2.5(0.8734) – 9.1(0.8163) – 18.6(0.7629) -
21.6(0.7130)
- 17(4.1002)(0.7130) – 14.2(7.0236)(0.5083) - 2.7(2.6243)(0.3166)
= $-151,710,860
AW of LCC = -151,710,860(A/P,7%,20)
= -151,710,860(0.09439)
= $-14,319,988
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