Calculate Separation Alternatives

ERDC TN-DOER-C27

July 2002

c. Calculate initial investment. The initial construction cost will equal the sum of all

construction costs and IDC for each construction year.

d. Develop maintenance dredging cycle and associated costs, including

mobilization/demobilization, dredging, dewatering, transportation, and placement.

Sufficient placement capacity must be available to accommodate all maintenance material

for the entire period of analysis. All associated placement costs, such as CDF construction

or expansion, as well as facility maintenance costs, must be developed and included.

Timing for future costs must be established.

e. Calculate net present value (NPV). Determine NPV of all costs, including construction

costs, IDC, and anticipated future expenditures. Summing the present value for each

project year, beginning with the base year (project year 1) and continuing throughout the

period of analysis, results in the present worth of all project costs. NPV is given by

NPV= Σ P [1/ (1+i)t ]

(2)

where

P = Annual cost

i = Federal discount rate

t = Time (project year)

f. Compute average annual equivalent values (AAEV). Through amortization the

previously calculated present worth can be converted to an average annual equivalent.

This calculation results in representation of the total project costs spread uniformly across

the period of analysis. Average annual equivalent values have a common price level and

base year, making it simple to calculate potential benefits. AAEV is given by

AAEV = (NPV)* (i)* [(1 + i)n / (1 + i)n-1 ]

(3)

where

NPV = Net present value (all costs)

i = Federal discount rate

n = Project life

g. Determine the base condition. If more than one alternative is being considered for the

base condition, these steps must be completed for each alternative. The least costly

alternative, including initial investment, IDC, and future maintenance costs, is the base

condition. The selected alternative will have the lowest average annual equivalent value.

III. Calculate Separation Alternatives

a. Develop construction/dredging costs. These will be engineering costs, including all items

that will impact the total project costs. Such items include, but are not limited to,

mobilization/demobilization, dredging, dewatering, separation, transportation, and

placement. Separation alternatives must also consider the value of the coarse material as

a negative cost, or profit, from the process. Establish a construction period, annual

quantity dredged (in situ basis), annual quantity residuals requiring placement or offsite