Construction equipment has two types of life estimates the economic life and physical life.

A machine can be rendered usable for long period of time through expensive maintenance and repair cost.

A equipments may have smaller economic life during which it gives more rate of return.

The economic life may be defined as the age in years and replacement that maximize the profit return from the equipments.

If the owner replace the equipment very soon, he will have unnecessary loss where as he waits very long, The equipment will have exhausted its periods of economic operations.

During the serving period of the equipment, a stage reaches when cost of operation exceeds profit.

At that time , it is better to dispose of the equipment for whatever salvage value it may pitch.

Factors:

Cost of the equipment.

Operation cost of Equipments.

Rental Rates.

Maintenance Expenses.

Scrap Value and Salvage Values.

Insurance Benefits.

Interest Rates, Etc