3. Outline of the Lecture

Try these first

1. 1.

   Define economic useful life.

   Hint

   Think about what makes operational costs lower.

2. 2.

   What do we call the current machine that may be replaced?

   Hint

   It's the opposite of challenger.

3. 3.

   What is the economic useful life?

   • Time when costs are minimized
   • Time when maintenance is maximum
   • Time when productivity is halved

   Hint

   Focus on cost management.

4. 4.

   True or False: Downtime costs do not affect project profitability.

   • True
   • False

   Hint

   Consider what happens when machines are out of service.

5. 5.

   A construction company used a bulldozer that costs $10,000 a year in maintenance and operational costs. A new bulldozer costs$20,000 upfront but only $2,000 annually to maintain. Determine the break-even point when to replace the old bulldozer.

   Hint

   Calculate how much total costs would be over time.

6. 6.

   Given a piece of construction equipment has been less productive over three years, document how to evaluate whether to keep holding it or replace it. Include factors to analyze.

   Hint

   Think about cumulative losses vs. new opportunities.