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Since capital expenditure costs are assumed to take place at time zero, they are at present worth, then no discountiny is needed. The interest rate factor is set at the prime lendiny rate, Addiny upfront capital costs to the present worth of annual costs allows the present costs of each alterna- tive to be compared, It produces a truly comparable estimate of costs for alternatives involving different investment and operational characteristics and permits this estimate to he expressed as a sinyle number, Calculations then can be done and compared on various annual tonnaye rates to determine the rate at which any new alternative would he comparable to or better than the existing trucking system, For additional information on the method of analysis, refer to Principles of Engineering Economy by Euyene L. Grant and W. Grant Ireson, Total costs consist of basically two types, capital expenditure costs and annual operatiny and maintenance costs. As a general proposition when capi- tal expenditure costs are high, annual costs tend to be low conversely, when capital expenditure costs are low, annual costs tend to be high, Annual expenses consist of operating and maintenance costs, Operating expense consisting of the total amount currently paid to C.WI contractor for trucking is the largest component of the truck haulage costs. Analysis of the conveyor system indicates that additional labor would be needed for it over the existing case because of additional facilities. Conveyor operatiny expenses would realize a saving in power because of the excess generated by a downhill conveyor system. The actual repair and maintenance expenses for a new transportation alterna- tive cannot really be determined until after construction of the facility. However, previous experience allows maintenance and repair expenses to he • approximated as a percentage of initial capitals, Experience with conveyors indicates that annual operatiny and maintenance costs are approximately 3 percent of the original capital investment, Maintenance costs of a truck haulage system consists of road overlay due to the heavy tonnage truck traveling the Steven's Gulch Road. As with any analysis involving future events, various assumptions must he made: 1) The "n" factor in the uniform series present worth I~,S.P,W, equation represents a contract term for coal sales. 2) The "i" factor in the II,S.P,W, equation is a discount rate set at the prime lendiny rate. 3) Calculations are based on information known as of November 1, 1984, To aid in understanding of the methodology, the following theoretical sample calculation is presented: SAMPLE CALCULATIONS Assumptions - Existing trucking cost = 80.50/ton - Road maintenance costs = 3300,000.DU/lU years - Annual production is 1,000,000 tons/year 4