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Asset Replacement Analysis: Maximizing Efficiency and Savings

Learn how to make strategic decisions on asset replacements to optimize costs and enhance performance efficiency, with practical examples and heuristic approaches covered. Understand economic life, marginal costs, and after-tax cash flow implications.

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Asset Replacement Analysis: Maximizing Efficiency and Savings

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  1. 17: Retirement and Replacement

  2. Introduction

  3. 17.1 Retirement

  4. Basics

  5. Example 17.1  Retirement

  6. Null Alternative

  7. Cash Flows

  8. Third Party Viewpoint

  9. 17.2 Single Replacement with Fixed Horizon

  10. Basics

  11. Ex 17.2  Replacement with Fixed PH and Single LC

  12. Ex 17.2  Defender

  13. Ex 17.2  Challenger A

  14. Ex 17.2  Challenger B

  15. 17.3 Economic Life and Marginal Costs

  16. Problem Complexity

  17. Need for Heuristic Approach

  18. Economic Life

  19. Ownership Costs

  20. Example 17.3  Economic Life of an Asset

  21. Data and EACs

  22. Sample Calculations

  23. Observations

  24. Observations (cont.)

  25. Marginal Costs

  26. Example 17.4  Marginal Costs of Previous Asset

  27. Common Pattern of EAC and MC

  28. 17.4 Multiple Replacements

  29. Approach

  30. Example 17.5  Simple Multiple Replacement

  31. Heuristic Selection of Best Challenger

  32. Heuristic Challenger Cost Curve

  33. Heuristic Overview of Remaining Logic

  34. Defender with Increasing EAC  Replace Today

  35. Defender with Increasing EAC  Keep At Least 1 Yr

  36. Example 17.6  Defender with Increasing EAC

  37. EAC Decreases,then Increases-Replace Today

  38. EAC Decreases,then Increases-Keep at Least1Yr

  39. Example 17.7   Decreasing, then Increasing EAC

  40. 17.5 After Tax Cash Flows

  41. Basics

  42. Note

  43. Ex 17.8 Challenger AT Cash Flows (Rounded)

  44. Defender Cash Flows

  45. Ex 17.9   Def ATCF w/ GD, then LD

  46. Ex 17.9   Def ATCF w/ LD, then GD

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