15. Equipment Life and Replacement Analysis (Part-1)
This chapter covers the concepts of equipment life and replacement analysis, focusing on determining the optimal economic life of machinery. It discusses various factors influencing the decision to replace machinery, such as repair costs, productivity, and obsolescence. Additionally, the chapter introduces analytical methods for estimating replacement time and highlights the importance of understanding costs associated with maintaining and operating equipment over its lifespan.
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What we have learnt
- Equipment life includes purchase, usage, wear and tear, replacement.
- Economic useful life is defined as the time period during which costs are minimized or profits are maximized.
- Obsolescence costs and downtime significantly impact the decision to replace machinery.
Key Concepts
- -- Economic Useful Life
- The time period during which the costs associated with a machine are minimized and profits are maximized.
- -- Defender and Challenger
- Defender refers to the existing equipment at a project site, while Challenger refers to the potential equipment considered for replacement.
- -- Downtime
- The duration during which a machine is not operational due to repairs, leading to productivity losses.
- -- Obsolescence Cost
- The loss in value and marketability of a machine due to advancements in technology and competitive models.
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