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Fig. 4 Elements of whole-life costs and life-cycle costs.
Source
ISO 15686-5 (
2008
,p.6)
”
planning - Part 5: Life-cycle costing
is relevant, which forms the basis for the
following de
nition, examination and debate.
According to the standard, LCC analysis is a
methodology for systematic
economic evaluation of life-cycle costs over a period of analysis, as de
“
ned in the
agreed scope
(ISO 15686
2008
, p. 2). Life-cycle costs are differentiated into
different categories: construction, operation, maintenance and end-of-life costs (see
Fig.
4
). LCC are distinguished from whole-life costs (WLC), which apart from LCC
also take into account externalities, non-construction costs and income. Environ-
mental costs introduced by environmental legislation (e.g. cost premiums for the
use of non-renewable resources) can be part of both approaches; WLC as well as
LCC, depending on whether the environmental cost impacts are external to the
constructed asset or not (ISO 15686-5
2008
, p. 22).
Conventional LCC is a management instrument that differs only marginally from
the discounted cash flow (DCF) analysis. DCF
1
is a method of valuing a project,
company or asset using the concepts of the time value of money (W
”
ring
2013
). All future cash flows are estimated and discounted to express their present
values. In comparison to DCF, the LCC approach focuses on costs, such as negative
ö
he and D
ö
1
In
finance, discounted cash flow (DCF) analysis is a method of valuing a project, company or
asset using the concepts of the time value of money. All future cash flows are estimated and
discounted to give their present values (PVs). The sum of all future cash flows, both incoming and
outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in
question. Present values may also be expressed as a number of years the purchase of the future
undiscounted annual cash flow is expected to arise (Wikipedia
2014
).
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