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Potential-pH Diagrams
THERMEXPERT - Potential-pH diagram generator

Intelligent Tools

POLEXPERT - Polarization Scan Artificial Neural Network Expert System

SEQEXPERT - Sequential Immersion Test Artificial Neural Network Expert System

CYLEXPERT - Rotating Cylinder Electrode Intelligent Rotation Rate Calculator

Corrosion Calculator

Corrosion Rate Calculator


Corrosion Economics Estimator

FINCALCULATOR - Corrosion Economic Calculator


TUTORIAL ON FINCALC - A COST OF CORROSION ESTIMATOR

David C. Silverman


Table of Contents

Introduction-What is FINCALC?
Using FINCALC-a step-by-step procedure
Background
  1. The Time Value of Money
  2. Application to Corrosion Economics
Research, Development, and Testing Input
          Capital Expenditure Input
Depreciation Input
Periodic Maintenance, Repair, or Other Expenses Input
Isolated Repair or Other One-Time Expenditures Input
FINCALC (Cost of Corrosion Estimator)

Periodic Maintenance, Repair, or Other Expenses

All equipment requires periodic repair or maintenance. For example, a car requires periodic fluid changes the expense of which can be estimated when the car is purchased. Examples of such maintenance and repair are painting, replacement of seals or gaskets, clean-out, etc. Sometimes ongoing corrosion monitoring or testing programs are necessary to support a project. Other periodic expenses might occur. Such expenses can often be budgeted on an ongoing basis and treated as an expense in the year in which they are made. In addition, as equipment ages, such expenditures can grow with time and that growth can be anticipated from experience. This potentially growing expenditure can be treated as a simple annuity payable at the end of each year during the project life time.

FINCALC allows for this entry twice. Periodic maintenance can be separated from periodic repair or other expenses or periodic maintenance and repair can be separated from other ongoing costs such as corrosion monitoring. Each section requires three numerical entries:
  1. the initially expected ongoing maintenance, repair or other expenditure lumped as one expenditure amount
  2. the year in which such periodic expenditure is expected to begin
  3. the rate of expenditure growth expected for such maintenance and repair
This rate of growth is expected to be constant during the life of the project. In addition, the rate of growth has to be less than the discount rate used to determine the present value. The calculation initiates at an interest rate that is greater than the rate of growth. FINCALC uses a modified interest rate to calculate the present value of maintenance, repair, and other expenses when growth of expenditure is expected. FINCALC automatically adjusts the lower bound discount rate so that it is always greater than the periodic expenditure growth rate. The correction is needed because a growth in expenditure greater than the discount rate used for the present value calculation would translate to a negative effective discount rate. Though the program allows for two such entries, the user can lump all costs together so that the numbers are entered once. Alternatively, periodic repair and maintenance can be lumped together and any additional periodic expenditures, such as expected periodic testing, support, or corrosion monitoring could be entered separately. (See the section Using FINCALC-a step-by-step procedure for an example of how these entries are made).

Previous Page: Depreciation Input

Next Page: Isolated Repair or Other One-Time Expenditure Input

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David C. Silverman, Ph.D. - Primary Consultant
E-Mail:     dcsilverman@argentumsolutions.com
Phone:     314-576-3586
Fax:         314-754-9825
Address:   The Argentum House
                14314 Strawbridge Ct.
                Chesterfield, MO 63017