Inputs
Example Data Table
| Asset | Initial (Purchase+Install) | Maint Yr1 | Maint Growth | Downtime Yr1 | Downtime Growth | Discount | Salvage Method | Suggested Cycle |
|---|---|---|---|---|---|---|---|---|
| Concrete Mixer | 18,500 | 650 | 5%/yr | 400 | 7%/yr | 9%/yr | Declining 18%/yr | 6–8 years |
| Diesel Generator | 47,000 | 1,250 | 6%/yr | 900 | 10%/yr | 8%/yr | Fixed 5,000 | 5–7 years |
| Tower Crane | 260,000 | 6,200 | 4%/yr | 9,000 | 8%/yr | 10%/yr | 10% of initial | 8–12 years |
Formula Used
The calculator evaluates each possible replacement year (1 to N) using an annualized cost approach. First, it converts all future costs to a present worth (PV), then converts PV to an equivalent uniform annual cost (EUAC).
Maintenance in year t: Mt = M1(1+gM)t-1
Downtime in year t: Dt = D1(1+gD)t-1
PV(n) = Initial + Σ[(Mt+Dt)/(1+r)t] − Sn/(1+r)n
where r is the discount rate and Sn is salvage value at year n.
Capital recovery factor (CRF): CRF = r(1+r)n / [(1+r)n − 1]
Equivalent annual cost: EUAC(n) = PV(n) × CRF
The recommended replacement cycle is the n with the lowest EUAC.
How to Use This Calculator
- Enter purchase and installation costs to define your initial investment.
- Estimate Year 1 maintenance and downtime costs from recent projects.
- Set growth rates to reflect aging, wear, and reliability changes.
- Choose a salvage approach that matches your resale practice.
- Pick a discount rate aligned with your capital policy.
- Click calculate and review the starred year in the EUAC table.
- Download CSV or PDF to attach the decision to reports.
Professional Notes on Replacement Cycle Planning
1) Why cycle timing matters on sites
Construction assets rarely fail on a convenient schedule. When aging equipment increases delays, the hidden cost is often larger than parts and labor. A replacement cycle analysis converts purchase, upkeep, and downtime into a single comparable annual figure (EUAC). This supports consistent decisions across fleets, subcontract packages, and temporary plant used on multiple projects.
2) Capturing maintenance and downtime escalation
The calculator models Year 1 maintenance and downtime as baselines, then applies growth rates. For example, a 6%/yr maintenance growth turns 1,200 in Year 1 into about 1,429 by Year 4. If downtime starts at 800 and grows 10%/yr, it becomes about 1,064 by Year 4. These escalations can shift the optimal cycle earlier.
3) Discount rate and capital policy impact
Discount rate represents the value of money over time. At higher rates, near-term cash flows weigh more, sometimes favoring shorter cycles when operating costs rise quickly. Typical contractor capital rates might range from 8% to 15%, while public projects may use lower rates. Always align the input with your organization’s policy.
4) Choosing a salvage approach
Salvage is credited at the replacement year as a discounted amount. Fixed salvage works when resale markets are stable. Percent-of-initial is useful for standardized components. Declining salvage approximates depreciation; for instance, 15%/yr declining salvage leaves about 44% of initial value after 5 years (0.855 ≈ 0.44).
5) Interpreting the EUAC table and sensitivity
The starred year is the minimum EUAC, but nearby years may be close. If the “EUAC advantage” is small, treat the decision as flexible and test scenarios. Increasing downtime growth, reducing salvage, or adding commissioning cost often moves the recommendation earlier. Use the exports to document assumptions and approvals.
FAQs
1) What does the recommended cycle represent?
It is the replacement year that minimizes equivalent uniform annual cost (EUAC), combining initial cost, escalating maintenance, escalating downtime, and salvage value under your discount rate.
2) Should I include fuel, operators, or consumables?
Include costs that change meaningfully with age. If fuel or labor is similar each year, it will not affect the optimal year much. If efficiency declines or staffing increases with age, include it in maintenance or downtime.
3) How do I estimate downtime cost realistically?
Use project delay penalties, standby rentals, lost production value, and crew idle time. Start with a conservative Year 1 value, then apply a growth rate reflecting reliability decline, parts lead time, and inspection downtime.
4) What if salvage is uncertain?
Run three scenarios: optimistic, expected, and conservative salvage. If the recommended year stays the same, the decision is robust. If it shifts, use market data and disposal constraints to narrow the assumption.
5) Why does a higher discount rate sometimes shorten the cycle?
A higher rate reduces the present value of later costs and later salvage, but it also increases the annualization factor. When operating costs grow quickly, the model can prefer earlier replacement to avoid steep late-life expenses.
6) Can I use this for building components, not just equipment?
Yes. Apply it to pumps, chillers, lighting systems, temporary works, or safety systems. Treat the “downtime cost” as productivity loss, disruption, or risk exposure when the component degrades.
7) How many years should I evaluate?
Evaluate at least the expected technical life plus a buffer. For many site assets, 8–15 years is common. For major plant or building systems, you may test 20–40 years depending on contracts and refurb cycles.