Replacement Policy of Machinery Whose Operating Cost Auguments with Time and Its Value for Money Also Changes at a Constant Rate with Time

Calculating steps in replacement policy when the value changes with time.

  1. After knowing the current value factor at a provided rate, it should be multiplied by that equipment’s maintenance or operating cost for different years.
  2. Equate the total cost by adding all original cost of every year with its increased current value.
  3. After this, increase discount factors to get a result.
  4. The next step involves dividing the total cost by the result which is obtained after increased discount factors are applied for every year.
  5. Procure a value which surpasses total cost related to equipment which will be substituted forits current year.

 

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