Optimum Replacement Life of Large Scrapers: Fid-Bau Portal

Optimum Replacement Life of Large Scrapers

Schrader, Charles R.

Data for a fleet of scrapers was collected from a highway contractor. This data was then analyzed using a modified version of the Douglas model of equipment life to determine the optimum equipment life in terms of present worth of profits. Application of the model indicated an optimum life (i.e., the point in time when the present worth of profits is maximized) of 2 years. This was much shorter than the accepted replacement cycle of the general contractor studies. It is clear that when such factors as the time value of money, obsolescence, tax effects, inflation, the cost of borrowed money, expected technological improvements in future machines, expected increased costs of future machines, the effect of maintenance and operating costs, and utilization are considered over the life of an equipment spread, the time to replace a given piece of equipment is much shorter than might be intuitively expected. When the total economic picture of machine life and utilization is considered, early replacement (after about 2 years' use) results in significantly profits to the contractor from his scraper fleet.