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Airline Capital Budgeting
Published in Bijan Vasigh, Ken Fleming, Liam Mackay, Foundations of Airline Finance, 2018
Bijan Vasigh, Ken Fleming, Liam Mackay
In the case of a long-term project, the opportunity costs are the opportunity to have invested the initial cash outflows in another project. To calculate the economic break-even point, the initial investment must be discounted over the life of the project to determine the yearly profit the project must make to compensate for the opportunity cost of foregoing other investments. This yearly profit is called the equivalent annual cost (EAC) and is calculated by taking the initial investment and dividing it by an annuity factor, since the annual cost is treated as an annuity (Ross, Westerfield and Jaffe, 2008). The formula for EAC is as follows: EquivalentAnnualCost(EAC)=InitialInvestmentAnnuityFactor
Optimized maintenance and renovation scheduling in multifamily buildings – a systematic approach based on condition state and life cycle cost of building components
Published in Construction Management and Economics, 2019
Abolfazl Farahani, Holger Wallbaum, Jan-Olof Dalenbäck
The S-LCC analysis considers the entire service life of a component and is used for the economic evaluation of each maintenance strategy in order to minimize maintenance costs. The total cost for each strategy includes inspection, all maintenance measures and reinstatement costs. Since different maintenance intervals in a given strategy result in unequal ESLs, the equivalent annual cost method (EAC) (Flanagan 1989), which combines all the costs into a single annual cost, is used for a better S-LCC evaluation. The maintenance interval, which yields the lowest EAC is then considered as the optimal maintenance interval for the respective component.