How to account for time-value of money in a total cost of ownership calculation?

How do you calculate the total cost of ownership?

The formula to calculate the TCO is to add the initial purchase value to direct, indirect and other hidden costs. The value so arrived is then subtracted from a projected resale/ residual value at the end of the asset’s lifespan.

What is total cost of ownership TCO and how is it determined?

Total Cost of Ownership normally includes eight key elements: Purchase price: cost price and supplier margin. Associated costs: transport, packaging, customs duties, payment terms etc. Acquisition cost: operation of the purchasing department.

What is total cost of ownership example?

Total cost of ownership is the sum of the purchase price of an asset plus operating costs for its lifetime. A simple example would be the cost of owning a car. You can buy a car, but you will still need to pay license fees and insurance premiums, and it must regularly be serviced.

What is the formula of total cost?

The formula to calculate total cost is the following: TC (total cost) = TFC (total fixed cost) + TVC (total variable cost).