Life Cycle Costing takes all direct and indirect costs into account over the entire life cycle of an asset (group) and calculates the Net Present Value or the NPV-related weighed yearly average of Total Cost of Ownership at different moments in time.
Costs are incurred at acquisition or creation, during normal operation (including maintenance, fixing and upgrading costs) and at the end-of-life with decommissioning costs and residual values. Many parameters will influence the Total Costs of Ownership, such as reliability, change in maintenance strategy, evolution of costs for energy, personnel or material.
Multiple hypotheses about various strategic parameters will lead to several business scenarios that will be evaluated using the correct basic principles for life cycle costing.
Other examples of analysis algorithms: