Determining Machine and Capital Equipment Charge-Out Rates Using Discounted Cash-Flow Analysis
The model ChargeOut! was developed to determine charge-out rates or rates of return for machines and capital equipment. This paper introduces a costing methodology and applies it to a piece of capital equipment. Although designed for the forest industry, the methodology is readily transferable to other sectors. Based on discounted cash-flow analysis, ChargeOut! provides more accurate financial outputs than traditional single-period models. ChargeOut! produces a break-even charge-out rate that will return any specified after-tax real rate of return over the economic life of the capital equipment. Alternatively, given a negotiated charge-out rate, the model produces net present values and real and nominal rates of return before tax and financing, before tax, and after tax. It also compares the negotiated charge-out rate with the calculated break-even rate, incorporates inflation, accounts for depreciation, and automatically conducts a sensitivity analysis. Graphs illustrate the major cost centers and cash flows.
- Paperback | 36 pages
- 215.9 x 279.4 x 2.29mm | 145.15g
- 14 Feb 2015
- Createspace Independent Publishing Platform
- United States
- black & white illustrations