Equipment Replacement Analysis
Find the economic life that minimizes average annual cost — a classic OR replacement model used for machines, vehicles, and capital assets.
Asset data
Highlighted year in results is the economic life.
Economic life idea
Capital recovery (purchase − salvage) falls as you keep an asset longer, while operating/maintenance costs rise. Economic life is the keep-horizon that minimizes average cost per year.
Undiscounted ATC
Choose the n with the smallest ATCₙ. That year is highlighted in the results table.
With interest (EAC)
When capital has a cost of money i > 0, convert the present worth of purchase, operating costs, and salvage into an equivalent annual cost using the capital recovery factor.
When to replace
Replace (or plan replacement) around the economic life unless a challenger asset has a lower EAC, regulations force earlier replacement, or reliability risk dominates pure cost.
Machine costs $10,000. Salvage and annual ops over 5 years are pre-filled. Find the year with lowest average cost.