19CSE42
Engineering Economics
Semester 5th
Balochistan University of Engineering &
Technology, Khuzdar
Department of BE CS
Assignment No. 1
Engineering Economics
Topic Name: Replacement Analysis
Submitted to: Engr. Farhan Ahmed
Submitted by: Muhammad Anees
Roll No.: 19CSE42
Submission Date: 18-05 -2022
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19CSE42
Engineering Economics
Semester 5th
Replacement analysis
Replacement analysis is the strategy utilized in capital planning which assists with concluding
regardless of whether the current resources need to supplant. An element needs to execute the
powerful substitution of the resources like hardware, the top of building, or gathering resources.
As time elapsed, resources are devalued or disabled, and they are arriving at the finish of helpful
life. They will lose their ability and some of them even broken before the finish of valuable life.
Assuming that these resources separated in the activity, it will influence the creation as well as
benefit. To forestall such occasions, the executives needs to set up the spending arrangement to
supplant these resources before they create any inconveniences.
Replacement Analysis terms:
Defender:
The current hardware or building recently executed.
Challenger:
The proposed replacement currently under consideration.
Aspects of Replacement Analysis:
Utilizing accessible information to decide the investigation method.
Deciding the base correlation between options.
Utilizing examination methods when:
Safeguard peripheral expense can be registered and is expanding.
Protector minor expense can be registered and isn't expanding.
Safeguard negligible expense isn't accessible.
Thinking about conceivable future challengers.
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19CSE42
Engineering Economics
Semester 5th
The Replacement Problem:
Engineers supplant the current due to:
Oldness - mechanical change.
Exhaustion - loss of market esteem.
Issues (Consider Before Starting):
Assuming a unit fizzles, must it be taken out for all time from administration? Or on the other
hand fixed? Are reserve units accessible assuming the framework ought to come up short?
Do parts or units bomb autonomously of the disappointment of different parts?
Is there a spending plan imperative?
If the unit can be fixed after disappointment is their a requirement on the limit of the maintenance
office?
Is there only one substitution permitted over the arranging skyline? Are ensuing substitutions
permitted whenever during the review time frame?
Is their more than one substitution unit (cost and quality mix) accessible at a given moment?
Do future substitution units vary over the long run? Are mechanical enhancements thought of?
Is precaution support remembered for the model?
Are occasional working and upkeep costs consistent or variable over the long haul?
Is the arranging skyline limited or endless?
Are ramifications other than monetary effects, i.e., sociotechnical issues considered?
Are annual duty outcomes considered?
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19CSE42
Engineering Economics
Semester 5th
What Is the Basic Comparison?
Identify the defender and the best challenger.
Product.
Machine.
Process.
Personnel.
Mix.
Marginal Costs:
Minimal Expenses are the step by step costs for keeping a resource. Model 12-2 represents the
estimation of the peripheral expenses for another thing.
Minimal Expense incorporates:
Misfortune in worth of the resource by holding it for another year
Lost revenue on the cash restricted in the resource
Expenses and costs straightforwardly connected with the venture or resource (e.g., protection,
working and support)
Replacement Analysis Technique
Replace when the marginal cost of ownership of the defender is more than the EUAC of the
challenger.
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19CSE42
Engineering Economics
Semester 5th
Analysis Technique # 1
Is Appropriate When Replacement Repeatability Assumptions Hold:
The best challenger is accessible in all ensuing years and will be unaltered in financial
expense.
The time of required assistance is boundlessly lengthy.
Relaxing the Restrictions:
This bookkeeping sheet thinks about that:
The best challenger is accessible in ensuing a very long time at a similar financial
expense.
The task life is known and restricted.
Replacement Analysis Technique #2
In the event that the substitution repeatability presumption holds, look at EUAC of the safeguard
resource at its base expense life against the EUAC of the challenger at its base expense life.
Replacement Analysis Technique #3
Compare the EUAC of the defender over its stated life against the minimum EUAC of the
challenger.
After Tax Replacement Analysis:
Adds extended viewpoint as changes happen in:
Staying monetary existence of protector.
Monetary existence of challenger.
Protector versus Challenger examinations.
Impacted by:
Deterioration MACRS.
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