Engineering Economic Analysis

402 REPLACEMENTANALYSIS

Mutually Exclusive Set of Challengers

"Current Champion" Asset

(previously implemented)

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Challenger-l Challenger-2

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Challenger-3

vs "Wmner" of Challengers Comparison

FIGURE 13-2 Defender-challenger comparison.

in comparing our previously implemented asset (thedefender)against the best current

availablechallenger.

If the defender proves more economical, it will be retained. If the challenger proves

more economical, it will be installed.

In this comparison the challenger being evaluated against a defender has been selected

from a mutually exclusive set of competing challengers. Figure 13-2illustrates this concept

in the context of a drag race between the 4~X~der and the challenger. Notice that the

challenger that is competing against the defender has emerged from an earlier competition

among a set of potential challengers. Any of the methods for evaluating sets of mutually

exclusivealternatives,previously discussed in this text, could be used to identify the "best"

challenger to race against the defender.However,it is important to note that the comparison

of these potential challenger alternatives should be made at each alternative's respective

minimum cost life.This concept is discussed next.

Minimum Cost Life Problems

Theminimumcost life of any new (or existing) asset is the number of years at which the

equivalentuniform annual cost (EUAC)of ownershipis minimized.This minimum cost life

is often shorter than either the physical or useful life of the asset due to increasing operating

and maintenance costs in the later years.of asset ownership. The challenger asset selected

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