Exam 18: Life-Cycle Costing

Life-cycle costing often involves situations where the investor is faced with a number of mutually exclusive alternatives.

Because the costs of goods and services tend to rise over time, the value of money declines with time; this process is referred to as "____."

One way in which price inflation can be accounted for is by calculating all future cash flows using "today's" dollars and using an adjusted interest rate.

In life-cycle costing, the compounding period will usually be _______.

The value adopted for the discount rate has a minimal effect on the outcome of the life-cycle costing analysis.

When using EUAC analysis, it is necessary to use multiple lives when the life spans of alternatives are not equal.

Compounding periods can be years, months, days, or any other discrete time period.

Economic decision analysis in the construction industry is referred to as the ____.

If you decide to invest your cash in a construction project, you will be forgoing the returns from an alternative project; this is known as the ____ of the funds.

Price inflation can be accounted for in two ways, one of which is to express future cash amounts in "then current" dollars and use an interest rate that takes inflation into account.

Interest rates are usually stated as a (an)____________.

Compounding periods can be years, months, days, or any other discrete time period.

The expression (1 + i )^N in the compound interest formula is known as the "____."

The process of ____ treats design decisions as investments, taking into account outlays and payback over the life of these investments.

A major advantage to using present worth analysis is that alternatives do not have to be considered over the same time period as they do with equivalent uniform annual cost analysis.

The ____ that an investor will accept on the life-cycle costing proposals he is considering will be the discount rate used in the costing calculations.

Because LCC treats design decisions as ____, we need to account for compound interest since interest will accrue not only on the original amount but also on the interest that is paid.

Life-cycle costing ensures that the best alternatives are chosen during the design process.

Another factor that can have a significant influence upon the discount rate used in life-cycle costing is the expected rate of ____.

In ____, the analysis typically involves evaluation of the present worth of some future expenses to decide whether the investor should spend an extra sum now to reduce those future expenses.