Economic life of equipment is determined by the increase in maintenance costs and the decrease in the value of use of the equipment.
Economic life of equipment
Economic life of equipment refers to the equipment from the beginning of the use (or idle), until due to tangible and intangible wear and tear (depreciation of the value of) and then continue to use the economically unjustified position of the total time, that is, from the date of installation of equipment in a new state and put into use, to the year of the lowest total cost of the annual life of the equipment and forced to withdraw from the original service function. The time from the date the equipment is installed and put into service in new condition to the year when the total cost of its annual life is the lowest and it is forced to withdraw from the original service function.
Renewal of equipment generally depends on the economic life of the equipment. The economic life of equipment can be determined as long as the average cost of using the equipment is minimized.
Factors affecting the life span of equipment
Technical composition of the equipment; cost of the equipment; object of processing; type of production; working shifts; level of operation; product quality; quality of maintenance; environmental requirements.
Estimation method
1, static model
Annual average cost of use CN = (P-LN)/N + 1/N × ∑Ct where CNN annual average cost of use of the equipment during the year, P is the actual value of the equipment, Ct is the equipment operating cost in year t, LN is the equipment operating cost at the end of year N, and LN is the equipment operating cost at the end of year N, and LN is the equipment running cost in year t. cost, LN is the net salvage value of the equipment at the end of year N. (P-LN)/N is the average annual asset consumption cost of the equipment, and 1/N x ∑Ct is the average annual operating cost of the equipment.
Because the longer the equipment is used, the more the tangible and intangible wear and tear of the equipment is intensified, which leads to an increase in the maintenance cost of the equipment, and this year-by-year incremental cost ΔCt is known as the equipment of the low deterioration. With the low deterioration of the value of the equipment loss method is called the low deterioration value method.
Economic life of the equipment N0 = √2 (P - LN) / λλ for the low deterioration value of the equipment.
2, dynamic model
Equipment economic life is to consider the time value of money in the case of calculating the net annual value of the equipment NAV or annual cost AC, by comparing the average annual benefit or average annual cost to determine the economic life of the equipment N0. Determination of the method.
When estimating the economic life of the equipment using the net annual value, the economic life of the equipment is determined by finding the minimum value of the average annual cost NAVmin (when the project is considered to be expenditure-based) or the maximum value of the average annual profit AVmax (when the project is considered to be revenue-based) and its corresponding yearly life.