8.2. Equipment Replacement Analysis Assignment

Equipment Replacement Assignment

(Defender Vs. Challenger Method)

(Free to share with attribution)

By Ted Robak

 

The following is information gathered and estimated by a contractor who is considering whether and when to replace the current harvester he owns with another similar one or one that uses new (improved) technology, but which costs significantly more.  Please undertake the analysis and determine what he should do.

 

Defender

O-Harvester

Current technology (can still be purchased today)

(Now 2 Yrs Old)

 

@ New Cost of

710,000

 

 

 

 

Market Value

UCC

CuM/PMH

O&M/PMH

Utilization

 

Yr 0 (NOW)

454,400

422,450

 

 

 

 

Yr 1 (3rd Yr)

363,520

295,715

12.00

76.00

79.00

 

Yr 2 (4th Yr)

290,816

207,001

12.00

77.00

77.00

 

Yr 3 (5th Yr)

232,653

144,900

11.50

80.00

75.00

 

Yr 4 (6th Yr)

186,122

101,430

11.00

81.00

73.00

 

Yr 5 (7th Yr)

148,898

71,001

11.00

84.00

71.00

 

Yr 6 (8th Yr)

119,118

49,701

11.00

85.00

69.00

 

 

 

 

 

 

 

 

Challenger

N-Harvester

(New technology)

 

 

 

@ Cost of

920,000

 

 

 

 

Market Value

UCC

CuM/PMH

O&M/PMH

Utilization

 

NOW (Yr 0)

920,000

920,000

 

 

 

 

Yr 1

736,000

782,000

12.50

86.50

80.00

 

Yr 2

588,800

547,400

13.50

87.62

82.00

 

Yr 3

471,040

383,180

14.00

88.74

82.00

 

Yr 4

376,832

268,226

14.00

89.86

80.00

 

Yr 5

301,466

187,758

14.00

90.98

80.00

 

Yr 6

241,172

131,431

14.00

92.10

76.00

 

Yr 7

192,938

92,002

13.00

93.22

74.00

 

Yr 8

154,350

64,401

12.50

94.34

72.00

 

 

 

 

 

 

 

 

Notes:(Must extrapolate market value for new old tech machine at end of years 1 and 2)

 

Tax Rate =

25

 

Days/Yr

210

 

 

Wood Price

$17.00

 

Wages/SMH

$18.00

 

 

SMH/Day

16

 

MARR (%)

9

 

 

 

 

 

 

 

 

 

Old Tech:

Utilization

Productivity

O&M/PMH

 

Year 1 =

78

12

74

 

Year 2 =

81

12

75