6. Replacement Analysis

Try these first

1. 1.

   What are the phases of equipment life?

   Hint

   Think about what happens when equipment wears out.

2. 2.

   What does defender refer to in equipment analysis?

   Hint

   It is the machine you might eventually replace.

3. 3.

   What does economic useful life denote?

   • The lifespan of the machine
   • When costs are minimized
   • The total time of use

   Hint

   Think about cost efficiency.

4. 4.

   True or False: Downtime refers only to repairs needed on equipment.

   • True
   • False

   Hint

   Consider other factors that lead to inactivity.

5. 5.

   A construction manager must decide whether to keep an excavator that is 12 years old. The running costs have increased by 40% over the last year, and a new model promises a 25% reduction in operating costs. Analyze the replacement decision using economic life principles.

   Hint

   Consider both the rising costs and the potential savings.

6. 6.

   You have two options: keep your current mixer that has frequent breakdowns but is not yet dead, or replace it with a state-of-the-art model. Estimate downtime costs over a year and compare against new mixer costs to justify your decision.

   Hint

   Account for all indirect costs that come with downtime.