Dependence of the equipment value on its age

What is it about?

Evaluation of second-hand machinery and equipment items requires information on the dependence of their market value on the age. Using market price data for these assets, you can get relevant statistical dependence. At the same time we can build a deterministic model of the same dependence based on common valuation principles. It turns out that the result is not consistent with the market data. We can resolve this paradox taking into account the stochasticity of the process of machinery and equipment items use. Built stochastic model allowed us to obtain a simple formula for the mean of the market value of equipment items lived to a certain age. It would seem that the technical condition of the equipment item (and hence its value) should depend not only on its age but also on its operation time. However the analysis showed that operating time of equipment item has little effect on its market value.

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Why is it important?

We offer new models for Percent Good Factors determining and the tables of Percent Good Factors for various types of machinery and equipment.

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