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Financial SkillsFinancial Skills
Financial Skills Review
Two types of budgets used in O&M
• Operating budget and the Project budget
– Operating budget is the cost to fund personnel, supplies, equipment, and utilities
– The project budget, is used for a special project or program, such as major construction projects, building additions, CMMS, or major capital equipment purchases.
Two methods for budget preparation:
• Historical
• Zero-based.
Financial
• Simple Payback (SP) requires little data and can be accomplished quickly
• SP=Investment/Annual Net Income or
• SP=Investment/Annual Net Savings
FinancialPayback Period
• One simple method of analyzing an asset replacement is the calculation of the payback period
FinancialPayback Period
• P=O/I
• P = the payback period in years
• O = the original investment to acquire the asset
• I = the average annual income after tax.
Business Case Analysis
Must Include:– Initial Cost
– Staffing
– Lease Cost
– Infrastructure Cost
– Permits/Licenses
– Maintenance
– Utilities
– Payback (In $ and Years)
FinancialCalculation for Energy Savings
• Energy Savings• If your hospital saved $500 in utility
costs in 4 weeks. At the same rate, much will you save in 8 weeks
• Simply Cross Multiply –
$500.00 x N =
4 8
FinancialCalculation for Energy Savings
• Q: If your hospital saved $500 in utility costs in 4 weeks. At the same rate, much will you save in 8 weeks?
• A: Cross Multiply –
Set up:
$500.00 x N =
4 8
Financial
• Life Cycle Cost Analysis – to find the total LCC of a project, sum the present values of each kind of cost and subtract the present values of any positive cash flows such as a resale value
• LLC = first cost + M/R + energy + water + replacement-salvage value
“I've got all the money I'll ever need, if I die by four o'clock.”
Henny Youngman
Questions
thank you