Life-cycle cost analysis of projects using a polynomial cash flow model for nonuniform maintenance and operations costs

摘要

A mathematical model is developed for calculating the life-cycle costs for a project where the maintenance and operations (M&O) costs change in a nonlinear manner with time. Closed-form solutions are presented for computing the present worth of projects with periodic cash flow profiles that can be approximated by polynomial functions. The results show that the life-cycle cost for a project can be grossly underestimated (or overestimated) if the M&O costs increase or decrease nonuniformly over time rather than being constant or linear as is often assumed in project economic evaluations. The following range of variables is examined: (1) project life from 2 to 15 years, (2) interest rate from 0 to 30 percent per year, and (3) polynomials of order 0 to 5. Simplified solutions or the present worth are presented for two limiting cases: extented project lifetime and negligible interest rate. Also a simplified expression is provided for accurate present worth M&O estimates for DSN projects. In addition, a sensitivity analysis of the model based on graphical results and a numerical example plus tables and graphs are given to help the reader calculate M&O life-cycle costs over a wide range of variables.