Capital Budgeting for Replacements with Unequal Remaining Life

Abstract

A capital budgeting decision procedure appropriate for choosing the continuance, replacement, or abandonment of an asset‐in‐place is examined. The optimal replacement decision on an asset already in service requires simultaneous consideration of project life, project chaining, and possible abandonment points for both the asset‐in‐place and the replacement asset. The additional information required for the suggested procedure over the traditional replacement procedure is generally manageable and a practical solution procedure is feasible.

Citation

Brooks, L.D. (1991), "Capital Budgeting for Replacements with Unequal Remaining Life", Managerial Finance, Vol. 17 No. 2/3, pp. 70-76. https://doi.org/10.1108/eb013671