Lifecycle Cost Analysis
Lifecycle Cost Analysis is a method of assessing which asset option, will be the most economical over an extended period of time.
Alternate Definitions
The International Infrastructure Management Manual defines Lifecycle Cost Analysis as any technique which allows assessment of a given solution, or choice from among alternative solutions, on the basis of all relevant economic consequences over the service life of the asset.
Methodology
- To calculate the Lifecycle Cost of an asset all cashflows, both positive (inflows) and negative (outflows) need to be identified for each year of the useful life of the asset.
- Cashflows should be stated in actual cash terms, that is all costs and incomes are at the levels expected in that year. No allowance should be made for inflation.
