Question

Please show me how to do this calculation. show the work

TCO Model Example Year 1 Year 3 Year 2 Present Со $ $ 1,200,000 450,000 war war $ 42,500 150 480 $ 480 480 -ci Cost Elements Purchase Price: Hardware Software licenses A, B, and C Acquisition Costs: Sourcing Administration Usage Costs: Opportunity cost - productivity Installation Equipment support Network support Warranty End-of-Life Costs: Salvage value $ 450,000 450,000 $ 450,000 700,000 $ $ 1,440,000 1,200,000 $ 1,440,000 $ 1,200,000 $ 1,440,000 $ 1,200,000 $ 120,000 $ $ $ (36,000) 3,054,480 2,174,790 Total Present Values @ 12% $ 2,512,650 $ 2,512,650 $ $ 3,090,480 2,759,799 $ $ 3,090,480 2,463,113 72 © 2016 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 6e

Answer 1

TCO Model Example Cost Elements Present Year1 Year2 Year3 Purchase Price a Hardware Working Note 1) 1200000 b Software Licenses(Working Note 2) 450000 Aquisition Costs c Sourcing(Working Note 3) 42500 d Administration(Working Note 4) 150 480 480 480 Usage Costs e Opportunity Cost(Working Note 5) 450000 450000 450000 f Installation ( 700*1000) 700000 g Equipment Support(Working Note 6) 1440000 1440000 1440000 h Network Support (Working Note 7) 1200000 1200000 1200000 i Warranty(120*1000) 120000 End of Life Costs j Salvage(36*1000) -36000 k Total 2512650 3090480 3090480 3054480 (a+b+c+d+e+f+g+h+i+j) | Present Value annuity Factor @12% 1 0.893 0.797 0.712 m Present Value(k*1) 2512650 2759799 2463113 2174790 I

Year2 Year3 Working Note 1: Harware Cost Elements A.$/PC B.No: of Pcs C.Hardware(A*B) Present Year1 1200 1000 | 1200000 0 0 0 ololol Working Note 2: Software Licenses Cost Elements A.$/PC B.No: of Pcs C.Software Licenses(A+B) Present Year1 Year2 Year3 1 450 000 1 1000 0 0 0 450000 0 0 0 Working Note 3:Sourcing A.Employese cost for 12 Months(85000+170000) B.Employese cost for 2 Months(255000*2/12) 255000 42500 Working Note 4 :Administration Cost Elements A. 1P.0 B.Invoices(12*40) C.Administration (A*B) Present Year1 Year2 Year3 150 0 0 480 480 480 150 480 480 480

Working Note 5 :Opportunity Cost Cost Elements A.Down time(15*30) B.No: of Pcs C.Opportunity Cost(A+B) Present Year1 Year2 Year3 450 450 450 0 1000 1000 1000 0 450000 450000 450000 Working Note 6:Equipment Support Cost Elements A.$/Month B.No: of Pcs C. No of Months C.Equipment Support(A*B*C) Present Year1 Year2 Year3 120 120 120 0 1000 1000 1000 12 12 12 0 1440000 1440000 1440000 Working Note 7:Network Support Cost Elements A.$/Month B.No: of Pcs C. No of Months C.Network Support(A*B*C) Present Year1 Year2 Year3 0 1000 100 100 0 1000 10001 1000 12 12 12 0 1200000 1200000 1200000