EP 1110-1-8
(Vol. 6)
31 July 03
4.8
Depreciation Factor
Depreciation is computed using the straight-line method. The depreciable value
is the acquisition cost, plus initial capital improvements, less estimated salvage. The
basis for determining the yearly percentage factor for depreciation is expressed by the
following formula:
Yearly DEPR Percent = (1 - SLV) /N
Where:
N = Useful Life from table 4-1.
SLV = Salvage Value from table 4-1.
4.9
The Cost of Money Rate (CMR) Factor
The CMR factor is calculated on a yearly basis and is expressed here as an
annual percentage factor. The CMR used in the calculation is the rate in effect at the
time the work was performed. This formula is expressed as follows:
[(N - 1)(1+ SLV) + 2](discounted CMR)
Yearly CMR Percent =
2N
Where:
N = Useful Life from table 4-1.
SLV = Salvage Value from table 4-1.
Discounted CMR = Cost of money rate (appendix I) reduced by 25 percent
for overhead and profit allowance.
4.10
Other Ownership Elements
Taxes, storage (lay up), and insurance are considered indirect (overhead) costs
as defined in ER 1110-2-1302, appendix D. These costs are not included in ownership
rates since they vary by geographic area and with individual contractors. These costs
are considered as overhead costs and are, therefore, not included here so they will not
be duplicated in the overhead in the estimate or submitted proposal.
SECTION VI. OPERATING FACTORS
4.11
Hourly Operating Cost
Operating cost is based on effective working time. Dredging plant operating
factors are shown in table 4-1. These factors, which are described in paragraph 4.12,
are not intended to replace historical data but shall be used when historical data is
limited or nonexistent.
4-4
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