For this homework you need to research each of the identified economics terms and

provide responses for the following: Provide a brief description of what it means in
terms of economics Provide a brief description of the value understanding the
particular item has for CENE type projects Identify a reference that you used for
each of the identified items 1. Life Cycle Costs (20 points) o Different categories or
sections of expenses for life cycle costs o Where is the bulk of the money spent for
a typical CENE project 2. Interest (20 points) o APR o APY o Compounding 3. Cash
Flow Diagrams (20 points) o Also provide an showing both income/expenses and net
impact to bottom line 4. Inflation (5 points) 5. Present Worth Cost (5 points) 6.
Equivalent Annual Cost (5 points) 7. Rate of Return (5 points) 8. Minimum Attractive
Rate of Return (5 points) 9. Payout Period (5 points) 10.Incremental analysis (5
points) 11.Varying study period (5 points)

1. Life Cycle Costs:

In terms of economics and engineering, the life cycle cost refers to the whole
cost of a particular item, good, structure, etc. This includes the beginning
cost, whether it be buying it, building it, planning it, etc., the cost while it is
up and running or as long as you are using the service, etc. It also includes
the cost of any upgrades that may be needed, and finally it includes the cost
of removing after it has served its purpose. Basically, it is the cost from the
very beginning to the very end and every cost in between. 1
a) Different categories or sections of expenses for life cycle costs:
As stated previously, the life cycle costs are separated into various
sections;
Initial cost: this refers to the cost that initially has to be designated
for any good, service, structure or system. In terms of engineering,
it is very important to understand what the initial cost of any
project may be in order to accurately be able to communicate with
our client/employer, etc. It is also important to note that this will not
be the only cost associates with the project so we need to plan
ahead and keep that in mind when determining what the initial cost
of a certain project may be.
Service costs: this refers to the cost associated with implementing
the good, service, structure or system- this may include installation
costs or even the purchase price. In terms of engineering it is
important to note that for a certain project, the service cost
includes actually building the model we have come up with at the
initial stage of the project; this may include hiring people to build it,
getting it up and running, etc.
Preventative and maintenance costs: this refers to the maintenance
costs associated any good, service, structure or system. In terms of
engineering, this means taking any measures to make sure that the
1 http://www.businessdictionary.com/definition/life-cycle-cost.html

structure we have created will work properly and making sure to fix
any problems that may arise in its life span.
Operating costs: this refers to the costs associated with actually
operating the structure; this may include the employees, the
utilities associated with this structure, the components that need to
be in use, etc. It is very important to have a clear picture of what
this figure might look like since we need to be prepared for any
malfunctions or unexpected circumstances that may arise while
operating this structure.
Disposal costs: this refers to the cost associated with disposing of
the good, service, structure or system. In terms of engineering, it is
important that we know when the structure has served its purpose
and can no longer benefit us or work properly. This cost includes
everything that may be associated with having to remove this
structure which may be very costly so we need to have an accurate
number when determining what this will cost when we were at the
initial stage of this project, including inflation costs. 2
b) Where is the bulk of the money spent for a typical CENE project:
Typically for a CENE project, the bulk of the money is actually spent on

Sum of all recurring and one-time (non-recurring) costs over the full life span or a specified period of a
good, service, structure, or system. In includes purchase price, installation cost, operating
costs, maintenance and upgrade costs, and remaining (residual or salvage) value at the end of ownership or its useful life
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References:

2 http://ramcraft.co.il/images/LCC.97297509.53608518.medium.jpg