Economic Analysis of Equipment Replacement

        First, the course begins with equipment wear and its measurement, systematically introducing physical (tangible) wear and obsolescence (intangible wear) arising from time, operating loads, and environmental conditions during equipment use. Through an analysis of wear mechanisms, the course explains the associated economic consequences, such as performance deterioration, increasing maintenance costs, and declining production efficiency. Common methods for measuring equipment wear are then presented, including service life, workload-based methods, and the economic interpretation of wear coefficients, providing a foundation for subsequent equipment economic evaluation.

      Second, the course focuses on the concept and calculation of equipment economic life. By distinguishing among technical life, physical life, and economic life, learners are guided to understand the economic criteria for deciding whether equipment should continue to be used. Centered on the minimum equivalent annual cost principle, the course systematically derives methods for calculating the equivalent annual total cost of equipment, analyzes the impacts of operating costs, maintenance costs, and salvage value on economic life, and uses representative numerical examples to help learners master the determination of economic life, thereby providing a quantitative basis for equipment replacement decisions.

       Building on this foundation, the course further develops equipment replacement analysis. Addressing the common engineering question of whether to continue using existing equipment or to invest in new equipment, the course systematically introduces the economic reasoning and evaluation methods for replacement decisions. Emphasis is placed on comparison principles for equipment with unequal service lives, the minimum equivalent annual cost method, and incremental analysis, while highlighting the correct treatment of sunk costs to avoid common decision-making errors and to enhance rational engineering judgment.

       Finally, the course introduces equipment leasing decision analysis, comparing the economic characteristics of purchasing versus leasing equipment. By examining the basic structures of finance leases and operating leases, the course explains how lease payments, the time value of money, taxation factors, and risk-sharing mechanisms influence decision outcomes, guiding learners to select optimal equipment allocation strategies under different engineering conditions and financial constraints.

       Overall, the course is oriented toward practical engineering problems and emphasizes the integration of theory with case studies. It enables learners to systematically master the fundamental methods and decision logic of equipment economic analysis, thereby enhancing their comprehensive capability to make informed decisions regarding equipment investment, replacement, and operation in engineering practice.