ABSTRACT
This chapter defines and discusses three types of equipment life: physical life, profit life, and economic life. It touched on the concepts of depreciation and replacement, inflation, investment, maintenance and repairs, downtime, and obsolescence that impacted the equipment replacement decision. Replacement analysis was introduced by demonstrating theoretical replacement methods by a continuing example, and practical replacement methods were also described. The concept of sensitivity analysis was applied to two of the theoretical methods to demonstrate gain accuracy and confidence in the output of the analyses. Finally, the decision-making process for replacement equipment selection was introduced in a step-by-step fashion and the four general factors that should be considered after replacement decision is made were explained.
