After-Tax Equipment Replacement Analysis Using Discrete Transforms

Abstract

Discrete transform theory has previously been shown to offer many operational advantages in the computation of the present worths of discrete cash-flow patterns. This paper extends its application to equipment replacement models. Terborgh's classical model is used as the basis. An after-tax analysis using the latest depreciation schedule based on the Economic Recovery Tax Act of 1982 is incorporated in the analysis. Included is an example on determining the optimal replacement life cycle.