General device model

Life Cycle Cost Financial Analysis Example - using representative numbers

Healthcare Technology Assessment
Total Cost of Ownership (TCO) Analysis
INFLATION/DEVALUATION FACTORS
Local Labor inflation factor
Initial
Value of a local dollar
Net Present Value of $1
Local Material inflation factor
Initial
Value of a local dollar
Net Present Value of $1
Imported Items inflation factor
Initial
Value of a local dollar
Net Present Value of $1
Currency Devaluation Factor
Initial
Value of a local dollar
Net Present Value of $1
Compound effect of
Imported items
Inflation and
Devaluation

7.0 percent
NOTES:
End Year One
Year Two
Year Three
Year Four
Year Five
$1
$1.0700
$1.1449
$1.2250
$1.3108
$1.4026
$1
93.46%
87.34%
81.63%
76.29%
71.30%
6.0 percent
End Year One
Year Two
Year Three
Year Four
Year Five
$1
$1.0600
$1.1236
$1.1910
$1.2625
$1.3382
$1
94.34%
89.00%
83.96%
79.21%
74.73%
10.0 percent
End Year One
Year Two
Year Three
Year Four
Year Five
$1
$1.1000
$1.2100
$1.3310
$1.4641
$1.6105
1
90.91%
82.64%
75.13%
68.30%
62.09%

Net Present Value (NPV) Factor

Initial
Value of a local dollar
Net Present Value of $1

3.0 percent
NOTES:
End Year One
Year Two
Year Three
Year Four
Year Five
$1
$1.0300
$1.0609
$1.0927
$1.1255
$1.1593
$1
97.09%
94.26%
91.51%
88.85%
86.26%

$1.1660

$1.3596

$1.5852

$1.8484

$2.1552

8.0 percent is the "cost of money," i.e., cost of loans, lost interest, etc
End Year One
Year Two
Year Three
Year Four
Year Five
$1
$1.0800
$1.1664
$1.2597
$1.3605
$1.4693
1
92.59%
85.73%
79.38%
73.50%
68.06%

Actual Life Cycle Analysis For a Capital Purchase

Imported items (In local currency converted from US dollar. Representative categories; add more categories as needed!)
Initial
Year One
Year Two
Year Three
Year Four
Year Five
Capital cost
$100,000
Installation
Repair Parts & Manuals
Supplies
Test equipment
User Training
On-site 2-day class
Maintenance

$10,000

$10,000

$0

$5,000

$2,000

$4,000

$4,000

$12,000
$2,500

$12,000

$14,000

$5,000

NOTES:

Free installation negotiated in

advance
$6,000 1-year warranty
Assumes 20% increase in service
$14,000 demands every 2 years

Training

$3,000

Service Contracts
Misc. repair labor (est)

$5,000

Imported items Annually

Total imported items

W/compounded
inflation &
devaluation

$3,000

$3,000
Will eliminate service contract after
training at end of year 1

$500

$500

$700

$700

$110,000

$23,000

$17,000

$24,500

$18,700

$23,700

$110,000

$26,818

$23,112

$38,838

$34,565

$51,079

Local Items (Representative categories; add more categories as needed!)

Initial
Year One
Year Two
Year Three
Year Four
Capital and Materials
Capital cost
$10,000
Installation
Repair Parts & Manuals
$200
$200
$200
Supplies
Total local materials
Total local materials
w/local material
inflation factor
Labor Factors
User Training - Labor
2 Nurses & 1 Biomed 2 days

NOTES:

Year Five

$200

$200

$1,000
$11,000

$1,000
$1,200

$1,200
$1,400

$1,200
$1,400

$1,400
$1,600

Assumes 20% increase in service

$1,400 demands every 2 years
$1,600

$11,000

$1,284

$1,603

$1,715

$2,097

$2,244

$400

$400

$500

$500

$500

$500

$700

$300
$800

$300
$1,200

$300
$800

$300
$1,000

$400

Maintenance - Labor
Training
Service Contracts
Misc. Repairs
Total Labor
Total Local Labor w/
Local Labor Inflation
factor

$200
$1,100

$500
$400
$200
$1,500

$1,100

$1,545

$849

$1,311

$900

$1,159

Total Local Costs

$12,100

$2,829

$2,452

$3,026

$2,998

$3,403

$122,100
$122,100

$29,647
$151,747

$25,564
$177,311

$41,865
$219,176

$37,563
$256,738

$54,482
$311,221

$122,100

$27,451

$21,917

$33,234

$27,610

$37,080

Total Local and

Imported Costs
Accum. Dollars

NPV Total Local

and Imported Costs
TOTAL - NPV
Total Local and
Imported Costs

$122,100

$149,551

$171,468

$204,702

$232,311

<This is the TRUE 5-year

Net Present Value of this
$269,391 entire project!!!!!