life cycle cost analysis
Life Cycle Cost Analysis
A church school is considering refurbishing the lighting system in its administration building. After initial investigation, the school procurement office has narrowed down the options to two.
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Order Paper Now- Option 1 is an Ergolight® system that costs $500,000 to purchase and install.
- Option 2 is a conventional system that costs $100,000 to purchase and install.
Both systems are expected to last for twenty years.
- The energy and maintenance costs for Option 1 are $20,000 and $2,000, respectively.
- The energy and maintenance costs for Option 2 are $50,000 and $10,000.
Assume that all costs are to be paid at the end of the year, and the real discount rate is 4 percent.
Create an Excel Spreadsheet in which you address the following:
- Which lighting system should the school select based on financial considerations? Use the LCC method to address this question.
- What is capital budgeting? How does it relate to the mission and strategic planning of a nonprofit?
- What are the major sources of financing for capital projects?
Note: The LCC method of calculations should be shown on the spreadsheet, followed by responses to the posted questions.
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