AACE International defines _____________as a technique of economic evaluation that sums over a given study period, the costs of initial investment, replacements, operations, and maintenance/repair; expressed in either present or annual value terms.
AACE International defines _____________as a technique of economic evaluation that sums over a given study period, the costs of initial investment, replacements, operations, and maintenance/repair; expressed in either present or annual value terms.
A . Risk analysis
B . Benefit/Cost ratio (B/C) method
C . Net present worth method
D . Life cycle costs method (LCC)
Answer: D
Explanation:
AACE International defines the Life Cycle Costs (LCC) method as an economic evaluation technique that sums all costs over a given study period, including initial investment, replacements, operations, and maintenance/repair, expressed in either present or annual value terms. This method is crucial in assessing the total cost of ownership of an asset, allowing decision-makers to consider all costs associated with an asset throughout its entire life cycle.
Option A: Risk analysis involves assessing potential risks and their impacts, not economic evaluation of life cycle costs.
Option B: Benefit/Cost ratio (B/C) method is a method of comparing the benefits of a project to its costs, not a summation of all life cycle costs.
Option C: Net present worth method focuses on the present value of future cash flows, but does not encompass the entire life cycle cost.
Thus, D. Life cycle costs method (LCC) is the correct answer as it directly aligns with the definition provided by AACE International.
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