Date of Award
Master of Science
Howard P. Emerson
Howard L. Loveless, Robert M. LaForge
It has usually been the prime responsibility of the general managers of manufacturing plants to increase the rate of return. Once an investment is made, it is largely irreversible. So the formulation of an equipment purchase or replacement policy plays a major role in achieving their goal. Since all durable goods are not like the "wonderful one horse shay" -- which lasted exactly one hundred years to the day, and fell apart completely, all at once -- the problem of when to replace them is a critical one.
The management is interested in obtaining the best possible piece of equipment among the innumerable alternatives available in the market which satisfy their requirements. There is every likelihood that a wrong one may be selected, when all the aspects concerning the project are not considered. The proper selection of equipment is, therefore, one of the most important decisions of management. One of the most helpful tools, in formulating the replacement analysis s the Economic Cost Model which in many cases is simply an equation, or a few questions, that represent the relative merits of the equipments considered for replacement. If properly developed and used, it gives a picture of the many challenging alternatives. Based upon the cost model, the management can make proper decisions.
Lakshmi, Seetharama, "Comparison of Methods for Equipment Replacement Decisions with Emphasis on the MAPI System. " Master's Thesis, University of Tennessee, 1963.