# Equipment Life Extension Solutions Value Calculator

### Payback Analysis

To save space, the menu below is compressed into 7 steps. To display the items within a step, click on the symbol to the left of each menu item. Doing so expands the menu and displays all the user entered choices within each step.

Overview of How Calculator Works

^{1}FICA (Social Security), Medicare and Unemployment are typically employer matched funds.
As a result, the cost to the employer must include these values. These values are in addition to
the withholdings paid by the employee.

^{2}Discount Rate: Internal cost of money or minimum required return before a
solution is considered worth of investment. The benefit of this solution must exceed
this value.

^{3}Salvage Value (existing): If the existing product has a residual value that can
be captured, then these funds can be applied to the "solution cost", effectively lowering the
cost of the new solution by an amount equal to this salvage value. The most conservative
estimate is to assume zero salvage value.

^{4}Salvage Value (new solution): When estimating the total cost of a solution, we
total the costs to provide the solution and subtract any benefits, refunds, savings or other
payments that reduce the total cost of the solution. One of those refunds is the
end-of-life salvage value.
If a value is entered here, the calculator adds this benefit to the final year savings and
computes a net present value equivalent benefit today based on the discount rate you selected
above. This benefit reduces the cost of the solution and works to improve the solution's
internal rate of return (IRR). As discussed above, the most conservative calculation is to
assume zero salvage value.

^{5}If the solution does not appear in the list, chose "Other" from pull down list and
enter the name or description of the solution. The MTBF and MTTR data must be entered
manually. One souce for this information will be Chapter 3 of the IEEE 493 (Gold Book), in
particular, table 3-2.

^{6}Multiple to multiply times the straight-line percentage. This value is multiplied times the
remaining book value to determine the annual allowable depreciation allowance. For example, a 5-year
straight-line depreciation would depreciate an asset 20% per year. A 1.5 multiplier (150%) would increase
the depreciation to 30%, but would be applied not to the original asset value, but rather to the remaining
book value at the end of that year. Use this method to simulate 125% or 150% declining balance depreciation
methods.