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Asset Replacement Principles

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  • R. K. Perrin

Abstract

Using a general model of asset replacement, a replacement principle is derived which applies to both appreciating assets such as forests and depreciating assets such as equipment. The resulting replacement criterion provides a definition of opportunity costs appropriate for the replacement decision. The theory is presented graphically for the continuous time case, and two discrete-time examples are considered. Theoretical implications of changing discount rates and market forces are considered as they affect replacement policies.

Suggested Citation

  • R. K. Perrin, 1972. "Asset Replacement Principles," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 54(1), pages 60-67.
    • Handle: RePEc:oup:ajagec:v:54:y:1972:i:1:p:60-67.
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    File URL: http://hdl.handle.net/10.2307/1237734
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