12 nr.LL SYSTEM TECHNICAL JOURNAL 



obtained if ni.iiiUcnanco charges wore oxpiessod as a ptMcciilage of 

 the first Ci»i. 



However, for coinparalixe cost studies of a\erai;e plant, main- 

 tained under average conditions, it is sonieiinies within ll)e i)recision 

 of the study to employ figures expressed as a percentage of the first 

 cost, provided the figures were derived from the cost of maintaining 

 average plant where axeragc conditions were know n to obtain. 



Adminislralion. In certain cost studies, a small allowance is 

 usually made to cover that portion of the salaries and expenses of 

 the general ofiicials of the C"ompan>- which is fairly chargeable to 

 the administration ol the |)lant. 



Operating Costs. In certain classes of engineering cost studies, 

 comparisons may involve the situation where one type of plant 

 costs initially more than an alternative type, but permits sa\ings 

 to be made in the daily operating labor which may or may not offset 

 the additional first cost. In such cases, to obtain a true comparison, 

 the operating labor costs under each plan must be combined with 

 the total annual charges which are applied to the first costs of the 

 respective plant quantities. 



Prksknt Worths 



luigineering cost studies fre(iueiill\' in\(]l\e a lialaiur between 

 |)lant installed at the present time and plant installed at some future 

 liini'. An example of this would be the comparison of a pole whose 

 life was to be extended by attaching it to a stub after (say) 15 years, 

 with a stouter and more expensive pole installed at present or with a 

 pole to which preser\-ative treatment was applied prior to its installa- 

 tif)n. 



In such cases it is not sufficient to compare annual costs which 

 arc to be incurred at different times w'ithout reducing them to a 

 basis upon which the\' can properly be compared. If a gi\x>n amount 

 is required to be expended at some future time, it obviously recjuires 

 a smaller stun at jiresent in iiand to meet tliis obligation if the fixed 

 time is far disl.uit than il il is in the ininiediale future. 



Let us picture oursehes at the vml of the \X'ar l!t2l. 1 1 an annual 

 charge of §1,000 is to be paid each \e,u' for the 5 years beniiuiing J.m- 

 uar\- 1, 1925 and ending Deceniix-r '.i\. 1920, tluTc will be required, 

 to ])ro\ide for these five SI, 000 pa>'menls, the sum of SI, 100, in hand, 

 assuming that interest is comiiounded annually at 7 ])cr cent. On 

 the other hand, if these five annual payments of SI, 000 each instead 



