Operating costs (OC

in operation. RepC is to be discounted to its present value, prior to the addition of the LCC total, using Equation (2) [20].

���� =∑�� ��=1( �� 1+��)�� (2)

Where:

- d is the discount rate (interest rate), - t is the year, and - n represents a specific year when the present value is calculated. - PV indicates the present value and - F is the future case amount occurring at the end of the year n [22].

The NIST takes the definition of discount rates a step further by separating them into two types: real discount rates and nominal discount rates. The difference between the two is that the real discount rate excludes the rate of inflation and the nominal discount rate includes the rate of inflation. This is not to say that real discount rates ignore inflation, their use simply eliminates the complexity of accounting for inflation within the present value equation. The use of either discount rate in its corresponding present value calculation derives the same result.

For instance, if the discount rate is 5%, then the present value of a cash amount of $78.35 today receivable at the end of the fifth year will be $100. For a decision-maker, those two amounts are time equivalent. Therefore, they will not have a preference between $78.35 received today and $100 received at the end of five years.

Operating costs (OC)

Operating costs include the cost of normal electricity use, water consumption, and other expenditures, such as custodial and insurance. Operating costs are annual costs that exclude maintenance and repair and other costs not directly related to the operation. The value is also adjusted to the present value using Equation (3):

where:

(1−(1+��)−��) ��

- d is the interest rate (%), - n is the study period of the analysis (years), - PV is the present value, and - PA is the annual recurring operating cost. (3)

Most goods and services do not have prices that change at exactly the same rate as inflation. On average over time, however, the rate of change for established commodities is close to the rate of inflation. Like discount rates, escalation rates are adjusted to remove the