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World Journal
of Engineering
and Pure and
Applied
Science.
20122!2"#45-
50.
Valuation (appraisal) gives an unbiased opinion of value or other physical attributes of identified property. Value, on the other
hand, is the monetary worth of property, goods or services. The Machinery and Technical Specialties (MTS) Committee of the
merican Society of ppraisers (S) established methods for valuation of property including machinery and e!uipment.
These methods conform to the "niform Standards of #rofessional ppraisal #ractice ("S##). Valuation of property and
indeed machinery and e!uipment is necessary for various purposes including ownership change, partnerships, mergers and
ac!uisitions. The $ndustrial $nspectorate %epartment ($$%) of the &ederal Ministry of $ndustry in conformity with the $nstitute
of ppraisers and cost 'ngineers ($C') of the (igerian Society of 'ngineers ((S') $nternali)ed the valuation process in
carrying out the mandate of determining the investment valuation of capital underta*ings with the view to issuing acceptance
certificate for capital allowance purposes and certificate of value for e!uity contribution. This paper sets out to streamline the
various valuation methods as a way of complementing the e+isting valuation process. The application of a combination of
these valuation methods is recommended to arrive at an unbiased opinion of value of any property and indeed machinery and
e!uipment.
Keywords: Machinery valuation, valuation process, capital underta*ing
-ESA&E -ESA&E -ESA&E -ESA&E < << <D-ANFAIS D-ANFAIS D-ANFAIS D-ANFAIS4D-EN9:? 4D-EN9:? 4D-EN9:? 4D-EN9:?
'valuation (,valuation) donne une opinion impartiale de la valeur ou d-autres attributsphysi!ues de la propri,t, identifi,e.
Valeur, d-autre part, est la valeur mon,taire des biens, des biens ou des services. .es Sp,cialit,s de machines et de techni!ues
(MTS)Comit, de l-merican Society of ppraisers (S) a ,tabli les m,thodes d-,valuationde la propri,t, y compris les
machines et l-,!uipement. Ces m,thodes sont conformes au+ normes uniformes de prati!ue professionnelle (,valuation
"S##). /valuation des biens et m0me la machinerie et l-,!uipement est n,cessaire 1 des fins diverses, y compris le
changement de propri,t,, des partenariats, des fusions et ac!uisitions. .e%,partement $nspection industrielle ($$%) du
Minist2re f,d,ral de l-$ndustrie en conformit, avec l-$nstitut des ,valuateurs et des ing,nieurs de co3ts ($C') de la (igerian
Society of 'ngineers ((S') int,rioris, le processus d-,valuation dans l-e+,cution du mandat ded,terminer la valeur
d-investissement de des pro4ets d-immobilisations en vue de la d,livrance du certificat d-acceptation pour les fins de la
d,duction des capitau+ et le certificat de valeur de la contribution de l-,!uit,. Ce document vise 1 rationaliser lesdiff,rentes
m,thodes d-,valuation comme un moyen de compl,ter le processus d-,valuation e+istant. .-application d-une combinaison de
ces m,thodes d-,valuation est recommand, d-arriver 1 une opinion impartiale de la valeur de tout bien et en fait des machines
et ,!uipements.
Mots-cls:.-,valuation de machines, de processus d-,valuation, entreprise de capital


IN;-6@A9;I6N IN;-6@A9;I6N IN;-6@A9;I6N IN;-6@A9;I6N
The goal of the valuation process is to produce an
unbiased opinion of value showing that the appraiser has
considered all factors that may affect the value of the
subject assets. The American Society of Appraisers
(ASA) through the Machinery Technical Specialties
(MTS) Committee !" formulated a valuation process that
conforms to the uniform standards of #rofessional
Appraisal #ractice ($S#A#).
The valuation process involves the following steps%
assembling of relevant data (definition of problem)&
conduction of mar'et survey& application of appropriate
analytical techni(ues& 'nowledge& e)perience and
judgment to reach conclusions& formation of values and
the preparation of an appraisal report. The definition of
the problem includes the identification of the property
(assets) to be appraised& purpose and the intended use of
the appraisal& premise of value& effective date and
limiting conditions. Appraisals can be performed for
individual pieces of e(uipment& a production line& a
complete operating facility or multiple operating
facilities. The client establishes the intended use of an
appraisal to enable the appraiser to identify the premise
of value and the appropriate value concepts and
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approaches. The purpose of e(uipment appraisal
includes accounting& financing& insurance& leasing&
li(uidation and ban'ruptcy& management planning&
transfer of ownership and ta) issues *". The premise of
value includes the fair mar'et value in continued use&
fair mar'et value installed+ fair mar'et value , removal&
orderly li(uidation value in place& orderly li(uidation
value& forced li(uidation or auction value& salvage value&
scrap value& insurance replacement cost and insurance
value depreciated (see appendi) - for the definition of
these terms) !". The valuation (effective) date is
important because it sets the e)act date at which the
value is determined and establishes the conte)t for the
opinion of value. The limiting conditions are also
important because they state& among others+ the limits to
the appraiser.s liability. The ne)t step in the valuation
process is the application of the appropriate value
concepts/techni(ues.
The value concepts/approaches include the cost
approach& sales comparison approach and the income
approach !". The cost approach is based on the
proposition that an informed purchaser would pay no
more for an asset than the cost of producing a substitute
with the same utility as the subject asset. This concept is
'nown as the principle of substitution. The cost approach
assumes that the ma)imum value of an asset to a
'nowledgeable buyer is the amount currently re(uired to
purchase or construct a new asset of e(ual utility. 0hen
the asset is not new& the current cost is adjusted for all
forms of depreciation attributable to the asset as of the
date of valuation. -n its simplest form& the cost approach
is represented as follows%
Cost 1ew , 2epreciation 3 4alue.
The starting point of the cost approach is reproduction
cost new& replacement cost new or a combination of both.
The sales comparison approach considers mar'et data in
determining the value of the subject assets. The purpose
is to determine the desirability of the subject assets
through an analysis of recent sales or offering of similar
assets to arrive at an indication of the most probable
price for the subject assets. -f the comparable from the
mar'et is superior to the subject asset regarding specific
characteristics& the comparable is adjusted downward or
upward if otherwise. -n its simplest form& the sales
comparison approach can be represented as follows%
Comparable Sale 5 or , Adjustment 3 4alue range.
The income approach considers values to be represented
by the present worth of future benefits derived from
ownership typically measured by the capitali6ation of a
specific level of income. The basic premise of the income
approach is that a purchaser e)pects to receive a certain
rate of return on the income stream attributable to the
subject assets. -t can be stated as follows%
4alue ) 7ate 3 -ncome
8r
-ncome 3 7ate ) 4alue (-74)
8r
-ncome 9 Capitali6ation 7ate 3 4alue.
The income approach may possibly be used to value
machinery and e(uipment that typically produce income
such as rail cars& airplanes and heavy construction
e(uipment. The final step in the valuation process is the
preparation of an appraisal report highlighting salient
issues leading to the determination of value for the
subject assets.
The -ndustrial -nspectorate 2epartment (--2) :" of the
;ederal Ministry of -ndustry (now Trade and Commerce)
adapted the valuation process to suit the administration
of its mandate. The mandate of --2 includes the
investigation of capital underta'ings with the view to
issuing acceptance certificate for capital allowance
purposes and certificate of value for e(uity contribution
of foreign technical partner in the form of machinery and
e(uipment. -n addition& the certificate of value is used
for deferred payments for imported machinery and
e(uipment. The steps involved in --2 investigation
include the review of supporting documents for the
capital e)penditure items& physical inspection of the
assets (capital e)penditure items)& writing of technical
report giving technical details of the assets& valuation of
the assets in the report and ma'ing recommendation and
finally& issuing the relevant certificate to the applicant
usually a corporate body/business after approval by the
head of the department (2irector).
There are five different methods of valuation by --2
namely capacity adjustment by e)ponential method
using available price data& unit price method& order of
magnitude approach using established cost profiles of
project already investigated& direct price comparison/cost
auditing and mar'et data& income and cost approaches
:". These methods are applied individually or
collectively to four categories of assets namely
plant/process e(uipment& standard machines& custom<
built machines and civil engineering wor's. The capacity
adjustment by e)ponential method computes the cost of
the subject plant of 'nown capacity from the following
formula.

CA
C=
=
(
PA
PB
)
x

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0here CA 3 Cost of subject #lant A
C= 3 >nown cost of #lant =
#A 3 >nown annual capacity of #lant A
#= 3 >nown annual capacity of #lant =
? 3 @)ponential factor appropriate for the
type of plant
(Average value of ) is A.BC)
The unit price method is simply multiplying the annual
plant capacity by a unit cost derived from the 'nown cost
of a similar plant. A typical unit cost is e)pressed as
installed capital cost per ton of annual production. This
method does not yield an accurate result but helps to
give an insight into the price of the plant or e(uipment.
Dowever& if the result obtained is used in conjunction
with the order of magnitude approach& a more accurate
and (uite acceptable value could be reached.
The order of magnitude approach is the use of
established cost profiles or modules from similar and
investigated projects to chec' the acceptable range of cost
ratios for new projects.
Capital cost auditing (2irect price comparison) is the
satisfactory matching and justification of the various
capital e)penditure claims with actuali6ed project scope
and content (specification).
The mar'et data& income and cost approaches are as
earlier presented under valuation process by ASA !".
The premise of value for the valuation by --2 is the first
cost (historical cost) for new assets and fair mar'et value
(;M4) for secondhand assets.
As stated earlier& the starting point for the cost approach
is the reproduction cost new& the replacement cost new or
a combination of both. The first cost (historical cost)
determined by valuation techni(ues adopted by --2 in its
investigation of capital underta'ings provides the
starting point for the cost approach.
The fair mar'et value (;M4) for secondhand assets by
--2 techni(ues gives an indication of values similar to
values derived by the sales comparison approach. -t is
therefore necessary to combine these techni(ues in any
valuation process to arrive at a well<supported opinion of
value for the subject assets.

&E;:6@6>6=I &E;:6@6>6=I &E;:6@6>6=I &E;:6@6>6=I
A combination of the valuation methods is applied in
two e)amples as follows%
--2 valuation methods are used to determine the first
cost (historical cost) which serves as the starting point for
the cost approach. Then the cost approach& the sales
comparison approach and the income approach are used
to determine the value for the subject assets. Comparison
and analysis of the result lead to the formulation of an
unbiased opinion of value for the subject assets

-ESA>;S -ESA>;S -ESA>;S -ESA>;S
Consider the following e)amples%
Examples 1
Eou are to appraise an ? company model E front<end
loader built in !FFG at a cost of HGA&AAA freight on board
(;8=) manufacturer. The current replacement cost new
is HBA&AAA. Eou have estimated all forms of depreciation
to be *GI and capitali6ation rate of JAI. The =rown
guide (hypothetical) indicates that similar !FFG machines&
similarly e(uipped are readily available in the used
mar'et with significant number of sales& selling for
H:GAAA to HJAAAA. The A=C mar'et survey report
(hypothetical) indicates very few model E machines are
available for rent but when they are available& the gross
rent is H*AAAA per year less !AI for lessor e)penses.
0hat is the fair mar'et value (;M4) using the cost& sales
comparison and income approaches. 0hat conclusion
can be made as the ;M4 for the subject assetK
Source% -nstitute of Appraisers and Cost @ngineers
(-AC@)& *AAG" J".
Solution
1ame of Company % ?
1ame of Machine % ;ront<@nd Loader
Type % Model E
Eear of Manufacture % !FFG
Cost of Machine % HGAAAA (;8=)
7eplacement cost new % HBAAAA
7esale value (resale mar'et) % H:GAAA < HJAAAA
2epreciation rate % *GI
Capitali6ation rate % JAI
Annual gross rent % H*AAAA
Lessor e)penses % !AI
a. Cost approach
4alue 3 Cost new minus 2epreciation
3 BAAAA , A.*G ) GAAAA"
3 BAAAA , !*GAA
3 JCGAA
b. Sales Comparison Approach
4alue 3 Comparable sale 5 Adjustment
3 :GAAA (JAAAA) 5 A.*G ) GAAAA"
3 :GAAAA (JAAAA) 5 !*GAA
3 JCGAA (G*GAA)
The comparable is adjusted upwards due to depreciation
in age. -t is built in !FFG similar to the subject machine. -t
is li'ely to be inferior to the subject machine.
c. Income approach
4alue 3 -ncome 9 7ate
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3 *AAAA , A.!A ) *AAAA" 9 A.JA
3 !MAAA 9 A.JA
3 JGAAA

The ;air mar'et value (;M4) of the front<end loader is
about HJCGAA.

Example 2
A plant has numerous machines but the bac'bone of the
production is made up of four 1umerically Controlled
(1C) machines. These consist of two identical A=C
Manufacturing company Model JA machining centres
and two identical ?EN manufacturing company Model
NN*A turning centres. All these machines were
purchased !G years ago in April. The effective appraisal
date is April ! of the current year. -t has been
determined that the normal life for the e(uipment is *A
years and that straight line depreciation is to be used. To
determine cost& the appraiser called the A=C
manufacturing company and spo'e with a salesperson
who has been there for more than *A years. The
salesperson stated that the Model JA machining centre
was no longer made and has been replaced by a Model
GA five years ago. This person was familiar with both
models and said that& by comparing specifications for
both machines& the Model GA had *AI more productive
capacity& reflected by a coinciding *AI increase in cost
which is represented by the H*JAAAA replacement cost
new of a Model GA. The appraiser called the ?EN
Manufacturing Company and was told that the Model
NN*A turning centre was still in production but that the
sales price had dropped to HBGAAA from HMAAAA. The sales
price dropped because the controls for this machine were
now less costly due to an improved design that made it
cheaper to manufacturer but did not affect its output.
Also& the Model NN*A is going to be replaced by a Model
NN*G within the ne)t si) months with the same
production capacity as the NN*A. Three different used
machinery dealers were contacted. All had one or more
identical A=C Model JA machines in stoc' and in good
condition. They were offering these machines at a
reasonably consistent price of H*BGAA but were having
trouble selling them due to the older type configuration.
Two dealers each had one ?EN machine Model NN*A for
sale. 8ne was offered at H**AAA and the other at H!MAAA.
=oth dealers felt that if they could not sell the machine
before the new Model NN*G was introduced& they would
have to drop the price drastically. The assessor and
ta)ing guidelines instruct an assessor to apply a trend
factor to the historical cost of the item and then
depreciate that amount on a straight line basis to arrive at
a fair mar'et value in continued use. The trend factor is
determined to be !.JG. The historical cost includes all of
the direct and indirect installation costs. The current cost
of installation is H*GAAA for the A=C Model JA and H!GAAA
for the ?EN Model NN*A.
0hat is the fair mar'et value (;M4) in continued use&
using the cost& sales comparison and income approachesK
7econcile the value using the most applicable approach
or combination of approaches. 0hat is the reproduction
cost newK
Source% -nstitute of Appraisers and Cost @ngineers
(-AC@)& *AAG" J"

Solution
!.1ame of Company % A=C
1ame and type of Machine % Model JA Machining
Centre
Age of Machine % !G Eears
1ormal life of Machine % *A years
Distorical Cost of Machine % H*AAAAA (-nstallation
included)
7esale value of Machine % H*BGAA
2epreciation rate (secondhand) % BI (Oenerated ,
Appendi) *) G"
Current -nstallation Cost % H*GAAA
2epreciation rate % CGI (straight line)
Lessor e)penses % !AI

*. 1ame of Company % A=C
1ame and type of Machine % Model GA
Machining Centre
Current 7eplacement Cost 1ew % H*JAAAA
Age of Machine % G years
1ormal life of Machine % *A years
2epreciation 7ate % *GI (straight line)
2epreciation 7ate (Secondhand) % GI (Oenerated ,
Appendi) *) G"

:. 1ame of Company % ?EN
1ame and type of Machine % NN*A Turning
Centre (Lathe)
Age of Machine % !G years
1ormal life of Machine % *A years
Distorical Cost % HMAAAA(installation
included)
2epreciation 7ate % CGI (straight line)
Current 7eplacement Cost 1ew % HBGAAA

7esale 4alue % H!MAAA and H**AAA
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2epreciation 7ate (Secondhand) % BI (Oenerated ,
Appendi) *) G"
Current -nstallation Cost % H!GAAA
Trend ;actor for the Machines % !.JG

!. ABC Model 40
a. Cost approach
4alue 3 *JAAAA , (A.CG ) *AAAAA)
3 *JAAAA , !GAAA
3 FAAA
;M4 in continued use 3 FAAA 5 *GAAA
3 :JAAA
b. Sales comparison approach
4alue 3 *BGAA , (A.AB ) *AAAAA)
3 *BGAA , !*AAA
3 !JGAA
;M4 in continued use 3 !JGAA 5 *GAAA
3 :FGAA

*. XYZ Model ZZ20
a. Cost approach
4alue 3 BGAAA , (A.CG ) MAAAA)
3 BGAAA , BAAAA
3 GAAA
;M4 in continued use 3 GAAA 5 !GAAA
3 *AAAA
b. Sales comparison approach
4alue 3 !MAAA , (A.AB ) MAAAA)
3 !MAAA , JMAA
3 !:*AA
;M4 in continued use 3 !:*AA 5 !GAAA
3 *M*AA

:. ABC Model 0
a. Cost approach
4alue 3 *JAAAA , (A.*G ) *AAAAA)
3 *JAAAA , GAAAA
3 !FAAAA
;M4 in continued use 3 !FAAAA 5 *GAAA
3 *!GAAA
b. Sales comparison approach
4alue 3 *JAAAA , (A.AG ) *AAAAA)
3 *JAAAA , !AAAA
3 *:AAAA
;M4 in continued use 3 *:AAAA 5 *GAAA
3 *GGAAA

J. 7eproduction Cost 1ew (Model JA)
3 *AAAAA ) !.JG
3 *FAAAA
G. 7eproduction Cost 1ew (Model NN*A)
3 MAAAA ) !.JG
3 !!BAAA

The income approach is not applicable because there is
no income stream associated with the machines.

@IS9ASSI6N @IS9ASSI6N @IS9ASSI6N @IS9ASSI6N
The cost& sales comparison and income approaches are
applicable in the first e)ample. The income approach is
not feasible in the second e)ample because there is no
income stream generated by the machines. -n the two
e)amples& the derived values are highest with the sales
comparison approach and least with the income
approach. This may be attributed to the uncertainties in
the resale mar'et. The sales comparison approach is
most reliable when there is an active resale mar'et
providing sufficient number of sales of comparable
property that can be verified independently through
reliable sources. The cost approach is reliable when all
forms of depreciation can be determined accurately. The
use of the income approach& on the other hand& depends
on accurate determination of the e)pected income stream
and the rate of return (capitali6ation rate) of a property.
The results of the e)amples show that fair mar'et value
(;M4) is within acceptable limits. The replacement cost
new is provided in the e)amples. 8therwise the first cost
(historical cost) which is the starting point of the cost
approach& would have been determined by an
appropriate --2 techni(ue :".

96N9>ASI6N 96N9>ASI6N 96N9>ASI6N 96N9>ASI6N
The study concludes that it is advisable to apply all the
approaches or a combination of the approaches in the
valuation of machinery and e(uipment to arrive at an
unbiased opinion of value because each approach has its
strong area of suitability. This fact is corroborated by the
results of the e)amples demonstrated in the study

-EDE-EN9ES -EDE-EN9ES -EDE-EN9ES -EDE-EN9ES
!" The Machinery and Technical Specialties (MTS)
Committee of the American Society of Appraisers
(ASA)& 4aluing machinery and e(uipment% The
fundamentals of appraising machinery and
technical assets+ *AAA. ASA & *AAA+ 0ashington 2C.
*" Machinery and @(uipment Appraisals. Available
from%
http%//www.appraisaleconomics.com/machinery.ht
ml Last accessed% 2ecember *A!!
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:" -ndustrial -nspectorate 2epartment (--2) of the
;ederal Ministry of -ndustry (;M-)& Standard wor'
procedure. Oovernment #ress& Lagos. !FFF.
J" -nstitute of Appraisers and Cost @ngineers (-AC@)
of the 1igerian Society of @ngineers (1S@)&
Machinery and @(uipment Appraisal Accreditation
course& part !. AC@. Abuja. *AAG.
G" @'eocha 7P8 Oeneration of machinery
deterioration rates. -nternational Pournal of
7esearch in @ngineering *A!A+*%!AF<!!.
A98N6W>E@=E&EN; A98N6W>E@=E&EN; A98N6W>E@=E&EN; A98N6W>E@=E&EN; 4 4 4 4 S6A-9E 6D SAPP6-; S6A-9E 6D SAPP6-; S6A-9E 6D SAPP6-; S6A-9E 6D SAPP6-;
1il


96ND>I9; 6D IN;E-ES; 96ND>I9; 6D IN;E-ES; 96ND>I9; 6D IN;E-ES; 96ND>I9; 6D IN;E-ES;
1o conflicts of interests were declared by authors.






















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@EDINI;I6NS 6D S6&E ;E-&S @EDINI;I6NS 6D S6&E ;E-&S @EDINI;I6NS 6D S6&E ;E-&S @EDINI;I6NS 6D S6&E ;E-&S
The following definitions are given by the Machinery and
Technical Specialties (MTS) Committee of the American
Society of Appraisers (ASA) !"

!. ;air Mar'et 4alue (;M4) is the estimated
amount& e)pressed in terms of money that may
be reasonably e)pected for a property in an
e)change between a willing buyer and a willing
seller& with e(uity to both& neither under any
compulsion to buy or sell and both fully aware of
all relevant fact& as of a specific date.
*. ;air Mar'et 4alue , 7emoval is the estimated
amount& e)pressed in terms of money that may
reasonably be e)pected for a property& in an
e)change between a willing buyer and a willing
seller& with e(uity to both& neither under any
compulsion to buy or sell and both fully aware of
all relevant facts as of a specific date& considering
the cost of removal of the property to another
location.
:. ;air Mar'et 4alue in continued use is the
estimated amount& e)pressed in terms of money&
that may reasonably be e)pected for a property
in an e)change between a willing buyer and a
willing seller& with e(uity to both& neither under
any compulsion to buy or to sell and both fully
aware of all relevant facts including installation
as of a specific date and assuming that the
business earnings support the value reported.
This amount includes all normal direct and
indirect costs such as installation and other
assemblage cost to ma'e the property fully
operational.
J. ;air Mar'et 4alue , -nstalled is the estimated
amount e)pressed in terms of money that may
reasonably be e)pected for an installed property
in an e)change between a willing buyer and a
willing seller with e(uity to both& neither under
any compulsion to buy or sell and both fully
aware of all relevant facts including installation
as of a specific date. This amount includes all
normal direct and indirect costs necessary to
ma'e the property operational.
G. 8rderly Li(uidation 4alue is the estimated gross
amount e)pressed in terms of money that could
be typically reali6ed from li(uidation sale& given
a reasonable period of time to find a purchaser
with the seller being compelled to sell on an as<is&
where<is basis as of a specific date.
B. ;orced Li(uidation 4alue is the estimated gross
amount& e)pressed in terms of money that could
typically be reali6ed from a property advertised
and conducted in public auction with the seller
being compelled to sell with the sense of
immediacy on an as<is& where , is basis as of a
specific date.
C. Li(uidation 4alue in #lace is the estimated gross
amount& e)pressed in terms of money that could
typically be reali6ed from a failed facility&
assuming that the entire facility would be sold
intact with a limited time to complete the sale as
of a specific date.
M. Salvage 4alue is the estimated amount&
e)pressed in terms of money that may be
e)pected for a whole property or a component of
the whole property that is retired from service
for use elsewhere.
F. Scrap 4alue is the estimated amount e)pressed
in terms of money that could be reali6ed for a
property if it were sold for its material contents&
not for a productive use.
!A. -nsurance 7eplacement Cost is the replacement
cost new as defined in the insurance policy less
the replacement cost new of the items specifically
e)cluded in the policy& if any.
!!. -nsurance 4alue 2epreciated is the insurance
replacement cost new less accrued depreciation
considered for insurance purposes& as defined in
the insurance policy or other agreements.
The following definitions are given by the
-ndustrial -nspectorate 2epartment (--2) of the
;ederal Ministry of -ndustry (;M-) :".
!*. Capital $nderta'ing means an underta'ing
carried on by way of trade or business for the
production of goods or services for sale and
re(uiring the use of industrial machinery or
other e(uipment& plants& building and other
permanent or temporary fi)tures on land.
8rdinarily& capital underta'ing means any
grouping of capital e)penditure items ac(uired
within a defined e)penditure plan (project)
which when operated ma'es a desired profit
contribution to the enterprise.
World J of Engineering and Pure and Applied Sci. 20122 22 2! !! !2 22 2"# "# "# "#52 52 52 52 ISSN 2249-0582
E$eoc%a 2012. E$eoc%a 2012. E$eoc%a 2012. E$eoc%a 2012. &ac%iner' and E(uip)en* +alua*ion

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!:. Capital @)penditures are e)penditures financed
through e(uity contribution& medium to long
term loans or through reserved earnings of an
operating enterprise for the ac(uisition and
installation of fi)ed assets or ac(uisition of
movable assets whose useful service lives at least
e(ual or e)ceed one accounting period (financial
year). These e)penditures are usually amorti6ed
or recovered over a period of time& which
appro)imates to the normal useful lives of the
assets.
!J. #rocess #lants/@(uipment are groups of system
related units of machinery& e(uipment and
accessories whose sole functions of production
are achieved through continuous operation or in
stages of the component machinery& e(uipment
and accessories in which the input materials
undergo various processes to yield the re(uired
end product.
!G. Standard Machines are machinery and
e(uipment designed and produced by a
manufacturer for sale to customers. (off shelf)
!B. Customs , =uilt Machines are non standard
machines manufactured to meet the customer.s
special needs. The prices of custom<made
machines are usually negotiated between the
buyer and the designer/manufacturer.


;A7>E 6D &A9:INE-I @E;E-I6-A;I6N -A;ES
The table shows the generation of deterioration rates for the machining/turning machines with *A years normal life from
GA random numbers G"

-ando) No. !Iear." Dre(uenc' @e*eriora*ion -a*e Pro2a2ili*'
!
*
:
J
G
B
C
M
F
!A
!!
!*
!:
!J
!G
!B
!C
!M
!F
*A
:
*
*
!
!
!
:
!
J
J
J
*
!
:
J
:
*
J
*
:
A.AG
A.!A
A.!G
A.*A
A.*G
A.:A
A.:G
A.JA
A.JG
A.GA
A.GG
A.BA
A.BG
A.CA
A.CG
A.MA
A.MG
A.FA
A.FG
!.AA
A.AB
A.AJ
A.AJ
A.A*
A.A*
A.A*
A.AB
A.A*
A.AM
A.AM
A.AM
A.AJ
A.A*
A.AB
A.AM
A.AB
A.AJ
A.AM
A.AJ
A.AB
!otal GA !.AA



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