Book - School of Science and Technology

Investment appraisals 68510805Additional capital cost - annual cost saving6420108640 2 4 6 8 10Years+ 7101520(a)+ 3.50200 2 4 6 8 10Years(b)Figure 23.6 Viability charts showing effect of changes in: (a) discount rates; and (b) energy cost premiumThree curves are shown, representing zero, plus 3.5 and plus 7% per annum. An excessrise of 3.5% per annum represents a doubling in 20 years and an excess rise of 7% perannum represents a doubling in 10 years.The foregoing has presented the principles of whole life costing in sufficient depth formost cases; the following is offered for further detailed consideration. To cater for thesituation where the energy saving material or equipment has a life shorter than that of thebuilding to which it is provided, the capital outlay figure may be adjusted using dataextracted from a further set of calculated factors as in Table 23.15. The first and secondcolumns here show how the present value of a single sum varies with the passage of time:the fourth column lists multipliers for capital sums according to the life cycle of thematerial or equipment. These multipliers are no more than successive additions from thesecond column, e.g. the 20 year cycle factor is the sum of the initial outlay, unit plus the 20and 40 year values: 1:0 ‡ 0:149 ‡ 0:022 ˆ 1:171.A developed chart for a discount rate of 10%, plotted to a logarithmic base scale, isshown in Figure 23.7 with added curves for excess premium in annual energy costs. The