What is a key consideration in Life-Cycle Cost Analysis regarding future costs?

In Life-Cycle Cost Analysis (LCCA), a fundamental consideration is the time value of money, and thus future costs are discounted to their present value. This process recognizes that the value of money changes over time due to factors such as inflation, interest rates, and opportunity costs. By discounting future costs, LCCA provides a more accurate assessment of the total cost of ownership over the life span of a project or asset.

When future costs are discounted to present value, decision-makers can effectively compare the costs incurred at different times relative to each other. This enables a clearer understanding of the financial implications of decisions made today in terms of their future impact. Therefore, incorporating the time value of money into LCCA ensures that all costs, regardless of when they occur, are properly evaluated in the overall economic analysis of a project.