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Calculating and Conveying the True Cost of Ownership of Projection Displays
Posted on Friday, August 7, 2009

 

As the world’s economies work their way toward recovery, the challenges of the past year have left us with valuable lessons.   Now more than ever, it is vital that the True Cost of Ownership, of any capital expenditure, be clearly defined and understood. Savvy end-users and purchasing agents are becoming increasingly aware that purchase decisions need to be based not just on the initial purchase price of the product, but also on the long-term cost of ownership, as the combination of the two actually defines the actual cost of owning and operating any product. This article will describe how you can calculate true cost of ownership information for your clients, in order to help them recognize all of the costs associated with projector ownership.
The formula for calculating full cost of ownership is straightforward, but first, let’s define some terms:
·         PPP = Projector Purchase Price – that being, the initial price the customer paid for each projection system.
·         OHrY = Operational Hours per Year – that being, the number of hours the customer expects to operate each projector on an annual basis.
·         AYS = Anticipated Years of Service – that being, the number of years the customer expects to operate each projection system. 
·         LLHr = Lamp Life in Hours - being the number of hours the manufacturer specifies each lamp to operate before reaching 50% of its original brightness.
·         LRC = Lamp Replacement Cost – that being, the customer’s cost for each replacement lamp.
·         LPU = Lamps Per Unit – being the number of lamps installed in each projector.  This is typically one, two or four lamps, depending on the manufacturer and the model.
·         AMI = Additional Maintenance Items – that being, the annual cost of any additional maintenance items that need to be replaced from time to time, such as filters, fans or color wheels.
·         PQ = Projector Quantity – being the total number of projectors in the customer’s application.
·         PwrC = Power Consumption – being the projector power consumption in Kilowatts.
·         ACPwr = Average Cost of Power – being the average cost of a Kilowatt Hour.
 
Now that the terms are defined, here is the formula to calculate the true cost of ownership for any number of projectors:
True Cost of Ownership =
((PPP   + (((((OHrY  x  AYS) / LLHr) – 1) x (LRC x LPU)) + (AMI x AYS))) + (OHrY x AYS x PwrC x ACPwr)) x PQ   
 
You can download the calculator as an Excel spreadsheet by clicking here. Included in the .zip file are Excel versions of the calculator for both Office 2003 and Office 2007. 
You can also copy and paste this formula, formatted for Excel, into a spreadsheet:
+((PPP+(((((OHrY*AYS)/LLHr)-1)*(LRC*LPU))+(AMI*AYS)))+(OHrY*AYS*PwrC*CPwr))*PQ
You may note that within the formula, one set of lamps is deducted from the total lamps consumed by each projector during its operational life. This accounts for the fact that the purchase price of each new projector already includes one set of lamps, which are already installed in the unit. Those are the first lamps used.
Here is an example of how to put the formula to work in a real world application:
We will assume a high-use application - 24 hour-per-day, 7 days-per-week, that employs (4) TITAN 1080p-700 displays, which are dual lamp projectors.   Being 3-chip displays, beyond lamps and filters, no additional maintenance items are required.
First, let’s organize the data:
·         PPP = Projector Purchase cost = $67,000 (list price of a TITAN 1080p 500 and a typical lens)
·         OHrY = Operational Hours per Year = 8760 (24 hours per day x 365 days per year)
·         AYS = Anticipated Years of Service = 7   
·         LLHr = Lamp Life in Hours = 2000
·         LRC = Lamp Replacement Cost =$995
·         LPU = Lamps Per Unit = 2
·         AMI = Additional Maintenance items = $0
·        
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