Plant and equipment acquisition: a life cycle costing case study

Uses a life cycle costing case study to describe a technique useful to facilities managers in a decision about the acquisition of plant and equipment. The case study investigates floor coverings in commercial buildings. Provides detailed financial calculations and incorporates a number of innovations. First, all the costs and benefits are included; life cycle costing is commonly promoted on a cost‐only basis, but all building expenditure generates a value effect and this must be measured in any meaningful study. Second, the choice of discount rate may be relieved by either sensitivity analysis or by the calculation of a “break‐even” discount rate; discusses these. The results show that vinyl is nearly 50 per cent more expensive than carpet and that the replacement of vinyl in an existing building with carpet has a payback of about three years.