Replacement Analysis - Worked Examples

Replacement Analysis - Worked Examples

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Replacement Analysis - Worked Examples

Example 1 — A truck bought for PHP 4M years ago can be sold today for PHP 1.3M. What time-zero amount enters the defender study?

Step-by-Step Solution

Example 2 — Defender EAC: current market value PHP 1.4M, O&M PHP 520k/year, salvage PHP 250k after 3 years, MARR 10%.

Step-by-Step Solution

Example 3 — Challenger EAC: first cost PHP 3.2M, O&M PHP 230k/year, salvage PHP 800k after 6 years, MARR 10%.

Step-by-Step Solution

Example 4 — Choose between the defender and challenger from Examples 2 and 3.

Step-by-Step Solution

Example 5 — Explain why defender book value PHP 2.1M should not replace market value PHP 1.3M in Example 1.

Step-by-Step Solution

Example 6 — One-year marginal cost: current market value PHP 900k, expected year-end market value PHP 700k, next-year O&M PHP 260k, MARR 8%.

Step-by-Step Solution

Example 7 — The best challenger has EAC PHP 480k/year and defender one-year marginal cost is PHP 532k. What does the one-year screen suggest?

Step-by-Step Solution

Example 8 — Why can a recent PHP 600k repair still be sunk even if management dislikes wasting it?

Step-by-Step Solution

Example 9 — Economic-life comparison: EAC for keeping a machine 2, 3, 4, and 5 years is PHP 820k, 710k, 680k, and 705k/year.

Step-by-Step Solution

Example 10 — Physical life is 12 years but economic life is 7 years. Is the machine unusable after year 7?

Step-by-Step Solution

Example 11 — Maintenance escalation uncertainty causes defender EAC to range from PHP 650k to PHP 850k while challenger EAC is PHP 720k. What should be reported?

Step-by-Step Solution

Example 12 — A challenger reduces annual downtime but has a higher purchase price. How should downtime enter the analysis?

Step-by-Step Solution

Example 13 — EAC falls from PHP 820k to 760k to 730k to 710k over evaluated retention lives 1–4 years. Can year 4 be declared the economic life?

Step-by-Step Solution

$Example 1 — A truck bought for PHP 4M years ago can be sold today for PHP 1.3M. What time-zero amount enters the defender study?$

$Example 2 — Defender EAC: current market value PHP 1.4M, O&M PHP 520k/year, salvage PHP 250k after 3 years, MARR 10%.$

$Example 3 — Challenger EAC: first cost PHP 3.2M, O&M PHP 230k/year, salvage PHP 800k after 6 years, MARR 10%.$

$Example 4 — Choose between the defender and challenger from Examples 2 and 3.$

$Example 5 — Explain why defender book value PHP 2.1M should not replace market value PHP 1.3M in Example 1.$

$Example 6 — One-year marginal cost: current market value PHP 900k, expected year-end market value PHP 700k, next-year O&M PHP 260k, MARR 8%.$

$Example 7 — The best challenger has EAC PHP 480k/year and defender one-year marginal cost is PHP 532k. What does the one-year screen suggest?$

$Example 8 — Why can a recent PHP 600k repair still be sunk even if management dislikes wasting it?$

$Example 9 — Economic-life comparison: EAC for keeping a machine 2, 3, 4, and 5 years is PHP 820k, 710k, 680k, and 705k/year.$

$Example 10 — Physical life is 12 years but economic life is 7 years. Is the machine unusable after year 7?$

$Example 11 — Maintenance escalation uncertainty causes defender EAC to range from PHP 650k to PHP 850k while challenger EAC is PHP 720k. What should be reported?$

$Example 12 — A challenger reduces annual downtime but has a higher purchase price. How should downtime enter the analysis?$

$Example 13 — EAC falls from PHP 820k to 760k to 730k to 710k over evaluated retention lives 1-4 years. Can year 4 be declared the economic life?$