PROPERTY LIFE CYCLE COST ANALYSIS METODS

Abstract

The minimization of the property life cycle cost as a criterion for making a decision regarding the economic feasibility of purchasing or building a certain real estate object compared to other objects with functional utility today has become a mandatory requirement of most regulatory and legal acts in Ukraine. At the same time, the practical implementation of this requirement faces the problem of methodical provision of life cycle cost analysis from the standpoint of the uncertainty of these costs in the future and the need to take into account the time value of money. The application of valuation procedures based on cash flow discounting, proposed in this article, can contribute to the solution of this problem. Discounting cash flows will require the classification of life cycle costs not only by content load, but also by the time of their occurrence into initial and future costs, which in turn are divided into once-only, periodic and regular costs. Acceptable units of measurement of discounted cash flows can be net present costs, equivalent annual cost, net savings; savings to investments ratio, internal rate of return, discounted payback period, each of which corresponds to its own model and valuation criterion. To solve the problem of the uncertainty of future costs and to take into account the risk inherent in their forecasting, the methods of analyzing the sensitivity of the results to changes in the market situation are proposed and the justified feasibility of using stochastic discounted cash flows models is justified.