Summary
Up to now all proposals being compared were required to have the same time span. In practice, all proposals won't have the same time span. This chapter explains how to find the economic life of assets and use that to set the planning horizon for a given decision analysis. This chapter covered the following main points:
The planning horizon is a consistent study period used for all proposals in a decision analysis.
Capital recovery, CR(i), is the cost—expressed as an equal-payment-series—of owning (but not operating or maintaining) an asset.
As the length of ownership of an asset increases, CR(i) tends to decrease. Conversely, the cost of operating and maintaining that same asset increases. An asset's economic life is the optimum time of ...
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