Return on Software: Maximizing the Return on Your Software Investment

Special Cases in Economic Life

There are two special cases to consider in economic-life calculations. The first special case is when the asset's annual operating and maintenance costs stay constant over its life and the salvage value also stays constant. This is common with purchased software where the salvage value is usually nearly zero (it's hard to sell used software to someone else) and the operating and maintenance costs will be relatively steady. In this case, the longer the asset stays in service, the lower its total AE(i) costs will be, so the economic life will be the same as its physical service life. For hardware, the physical service life ends when it just can't be repaired any longer (e.g., it's worn out beyond repair or the replacement ...