Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 328 JUNE 2016 • FOGHORN FOGHORNFOCUS: OPERATIONS & MAINTENANCE ing scenario. Historically, engine life of our example vessel’s diesel power plant has been 48,000, 56,000, and 60,000 hours. This gives an MTBF of (48,000+56,000+60,000)/3= 54,667 hours. With daily hours per vessel of 18, 54667 hours translates into about 8 years: 54,667/(18 hours per day x 365 days per year) = 8.32, say 8 years. Now comes a bit of math. How do we compute a future value? Three things MUST be known first: the present value, the number of years into the future we are concerned with, and a rate of inflation. • Use the formula: FV = PV(1+r)n • FV is the Future Value we wish to find • PV is the Present Value • r is the annual, historical rate of inflation (assume 3.22%) • n is the number of years in the future Using our repowering scenario: Let’s assume a replace- ment diesel engine has a value today of approximately $80,000. • We have an MTBF of 8 years (computed earlier) • We’ll assume annual inflation is 3.22% (expressed decimally as .0322 – a must!) • FV = $80,000(1+.0322)8 = $103,087 Now we are going to find the amount to set aside each year in our “savings account” (or sinking fund) so we have the needed money some number of years in the future. • We need to know FV (previously calculated), and we need to know what interest our “savings account” will earn. • Sinking Fund “Deposit”= FV / {[(1+rs)n -1]/rs} • Where rs is the interest the account earns annually • And n is the number of years in the future So exactly what do we need to deposit each year to have those funds ready 8 years from now? We know we’ll need $103,086 eight years out, and we’ll assume our “savings account” (or other carefully selected investment vehicle) can earn 1.5% (expressed decimally as .015 – a must!) annually. Sinking Fund “Deposit”= FV / {[(1+rs )n -1]/rs} = $103,086 / {[(1+.015)8 -1]/.015} = $12,225 So setting aside $12,225 each year for the next 8 years in my “savings account” will have us ready to buy a new diesel at its predicted purchase price One effective planning and calculating tool is an Excel spreadsheet. It can be built to model the needed financial cal- culations. In ours simply plugging in a PV, a rate of inflation, rate of return, and an MTBF will generate the needed reserve deposits from the calculated FV. We also recommend that you consider this approach as a dynamic one. Revisit your calculations at intervals of at least every two to four years. This way, you’re addressing short-