Factors Affecting the Selection of Construction Equipment A frequently occurring decision making problem to a contractor in a construction project : Selection

on of most suitable equipment. Types & Size of equipment depending upon particular project. Costs & Profitability in using that equipment. Usability of that equipment i.e. with respect to future projects. Durability, Workability & Disposability of that equipment. For example; Any time a unit of equipment will pay for itself on work that is certain to be done it is good business to purchase it. i.e., if a unit of equipment costing $25,000 will save $50,000 on a project, a contractor is justified in purchasing it, regardless of the prospects of using it on additional projects or the prospects of selling it at a favorable price when the project is finished. Two types of equipment Standard type of equipment. Special type of equipment.

STANDARD EQUIPMENT There is no clear definition for standard Equipment, since equipment that is standard for one contractor may be special equipment for another contractor. Standardization depends upon the extent to which a contractor will use it in his construction operations. Equipments which are Commonly manufactured and available to prospective purchasers may be classified as standard equipments. Contractor should confine their purchases to standard equipment unless a project definitely justifies the purchase of special equipment, because of following advantages; Delivery of standard equipment may be obtained more quickly. Standard equipment can be used economically on more than one projects. Repair parts for standard equipment may be obtained more quickly and economically than for special equipment. If a contractor no longer needs a unit of standard equipment, S/he can usually dispose of it more easily and at a more favorable price than a piece of special equipment special equipment The equipment which is manufactured for use on a single project or for a special type of operation, may be specified as special equipment; since such equipment may not be suitable or economical for use on another project. For example, A 90 cubic yard power shovel used to remove the overburden in strip mining for coal. The hydraulic dredge which was constructed primarily for use in building the Ft. Randall Dam.

REPLACEMENT OF PARTS The ease and speed with which replacement parts may be obtained, will affect the selection of equipment.; since all equipments are subject to failure, regardless of the care which they receive. Hence prior to purchasing equipment, the buyer should determine where spare parts obtainable. If spare parts are not obtainable quickly, it may be wise to purchase other equipment, for which parts are quickly available, even though the latter seems less desirable. The Cost of Owning and Operating Construction Equipment At best the cost of owning & operating can be estimated on the basis of previous experience or past usage & performance records of a particular equipments (but it is subject to availability of past records). Factors which affect the cost of owning and operating equipment include; The cost of the equipment delivered to the owner. The severity of the conditions under which it is used. The number of hours it is used per year. The number of years it is used. The care with which the owner maintains and repairs it The demand for used equipment when it is sold, which will affect the salvage value. At the time of estimation of costs following types of costs should be taken care off; Investment and Depreciation (Usually termed as Ownership Cost). Maintenance, Repairs, Lubrication, and Fuel (Usually Termed as Operating Cost) INVESTMENT COST In simple terms, it costs money to own equipment. It includes; Interest on the money invested Taxes of all types which are assessed against the equipment, insurance, and storage. The rates will vary somewhat among the different owners, with location, and for other reasons. These ownership costs usually accrue whether or not the equipment is actually used, so it becomes important to maximize the utilization of all such equipment. METHODS Methods of determining the cost of interest paid on the money invested in equipment; Some equipment owners charge a fixed rate of interest against the full purchase cost of the equipment each year it is owned. But this method gives an annual interest cost which is higher than it should be. One realistic approach is that, for each year that equipment is used, the owner should deduct from its earnings an amount equal to the annual coat of depreciation. Since this money is retained by owner, it reduces his net investment in the equipment. After the equipment has been used for the estimated depreciation period, expressed in years or units of production, the owner will have recovered its original cost through the reserve for depreciation.

Note: For both the methods, the interest charged should be based on a realistic value for the equipment, instead its original cost The average annual coat of interest should be based on the average value of the equipment during its useful life. This value may be obtained by establishing a schedule of values for the beginning of each year that the equipment will be used

Illustration for calculation of the Investment cost

Given, Original cost of equipment = $25,000 Estimated Useful Life = 5 yr Average annual cost of depreciation, $25,000/5 =$5,000 Beginning of year 1 2 3 4 5 6 Cumulative Depreciation (in $) 0 5,000 10,000 15,000 20,000 25,000 Value of equipment (in $) 25,000 20,000 15,000 10,000 5,000 0

Total of values in column 3 = $75,000 Average value, $75,000/5 =$15,000 Average value as % of original cost, {($15,000 X 100 ) / $25,000 }= 60 Thus, the average value of equipment having an estimated life of 5 years is 60% of the original cost.

An alternative method of determining the average value of the equipment having no salvage value, based on the Straight-line depreciation. Straight line Depreciation Method The value of a unit of equipment whose initial cost is represented by P at the beginning of each year during its estimated life of N years. Pavg = {P + (P/N)}/2 ={PN+P}/{2N} ={P(N+1)}/{2N} Where, P = Total Initial Cost Pavg = Average Value N = Life in years

P 4P/n Book Value 3P/n 2P/n P/n 0 0 1 2 3 4 n Life in years with no salvage value

Average value of equipment with no salvage value (for various years of life, expressed as a percent of the initial cost) : Estimated life (in yr) 2 3 4 5 6 7 8 9 10 11 12 Average value as % of original cost 75 66.67 62.5 60 58.33 57.14 56.25 55.55 55 54.54 54.17

The average value is the sum of the values at beginning of the first year and the beginning of the last year divided by 2. Pavg = [{P+{(P-S)/N}+S}/2] = {P(N+1)+S(N+1)}/(2N) Example : Consider a unit of equipment costing $25,000, with an estimated salvage value of $5,000 after 5 years. Hence, Pavg = {{25000(5+1)+5000(5-1)}/(2X5)} = {(150000+20000)/10} = $ 17,000 DEPRECIATION Depreciation is the loss in value of apiece of equipment over time, generally caused by wear and tear from use, deterioration, obsolescence, or reduced need. The profitable owner of the equipment must recover this loss of value in equipment which he owns during its useful life. Depreciation may be tracked during life of a piece simply by preparing a graph of the market value of the equipment with time.

Caution should be exercised in selecting the appropriate market value. For example, most equipment has a wholesale and a retail market value, which are dependent upon many factors. Depreciation and depreciation accounting are two different terminologies. Depreciation accounting is the systematic allocation of the costs of a capital investment over some specific number of years. The three reasons for calculating the depreciation accounting value (i.e., book value) of a piece of equipment, which are; To provide the construction owner and project manager with an easily calculated estimate of the current market value of the equipment. To do this the method of depreciation accounting selected should approximate market value. To provide a systematic method for allocating the depreciation portion of equipment ownership costs over a period of time and to a specific productivity . The method chosen should be simple and easily understood. To allocate the depreciation portion of ownership costs in such a manner that the greatest tax benefits will accrue. Depreciation accounting for this purpose must follow strict legal governmental guidelines, which frequently change as new laws are enacted. It is common to utilize at least two, and sometimes three, different depreciation accounting methods on a particular piece of equipment , reporting one value to the estimators for use on construction and another to the internal revenue service to obtain the most favorable tax benefits. To calculate the depreciation by any depreciation method, close estimates of the following items must be known; The purchase price of the piece of equipment (termed P) The economic life of the equipment (the optimum period of time to keep the equipment), or the recovery period allowed for the income tax purposes(termed N) The estimated resale value at the close of the economic life, known as the salvage value(termed F) Methods for the Calculation of Depreciation The following three methods are most commonly used for the calculation of depreciation; Straight-line method Sum-of-the-years method Declining-balance method Straight-line method Easiest and most widely used method. The annual amount of depreciation Dm, for any year m, is a constant value, and thus the book value BVm decreases at a uniform rate over the useful life of the equipment. The equations are; Depreciation rate, Rm=1/N Annual depreciation amount, Dm =Rm(P-F)=(P-F)/N The value P-F is often referred to as depreciable value of the investment.

Illustration for SL method

A piece of equipment is available for the purchase for $12,000, has an estimated useful life of 5 years, and has an estimated salvage value of $2,000. Determine the depreciation and the book value for each of the 5 years using the SL method. Hence, Given N=5, Rm=1/5=0.2 Dm =0.2(12000-2000)=$2,000 per year
m 0 1 2 3 4 5 BVm-1,in $ 0 12,000 10,000 8,000 6,000 4,000 Dm, in $ 0 2,000 2,000 2,000 2,000 2,000 BVm,in $ 12,000 10,000 8,000 6,000 4,000 2,000

Assuming the equipment is expected to be used about 1,400 hr per year. Hence the estimated depreciation portion of the ownership cost of this piece of equipment is; $2,000/$1,400 = 1.428 ~ $1.43per hr. Sum-of-the-years (SOY) method of depreciation accounting An accelerated method (fast write-off), which permits rates of depreciation faster than straight line method. The rate of depreciation is a factor times the depreciable value (P-F). This factor is determined as follows;The denominator of the factor is the sum of digits including 1 through the last year in the life of the piece of the equipment. Thus; SOY = N(N+1)/2 The depreciation rate Rm is Rm =(N-m+1)/SOY The annual depreciation Dm for the mth year (at any age m) is; Dm = Rm(P-F) = (N-m+1)(P-F)/SOY The book Value BVm at the end of the year m is; BVm = P- {(P-F ) * {m(N-m+1)/SOY}}

Illustration of SOY
Using same values as given in SL method example calculate the allowable depreciation and the book value for each of the 5 years using SOY method. Solution : SOY = 1+2+3+4+5 = 15 or 5*6/2 = 15 Rm =( 5-m+1 )/ 15 D m = Rm * (12,000-2,000) = (5-m+1)(10,000)/15
Year 0 1 2 3 4 5 Rm 5/15 4/15 3/15 2/15 1/15 Dm, in$ 0 3,333 2,667 2,000 1,333 667 BVm, in$ 12,000 8,667 6,000 4,000 2,667 2,000

Notice that in case of SOY, the allowable depreciation each year is different, which makes calculations of hourly costs cumbersome as they would change each year. Similarly, calculations of depreciation costs per unit of work would also be cumbersome. Consequently, most companies is the straight line method of depreciation accounting when calculating hourly or other unit costs to recover depreciation on the equipment. Declining-Balance Methods Also an accelerated depreciation method that provide for even larger portions of the cost of a piece of equipment to be written off in the early years. This method often more nearly approximates the actual loss in the market value with time. Declining methods range from 1.25 times the current book value divided by the life to 2 times the current book value divided by the life ( the latter is termed as double declining balance). Note that although the estimated salvage value F is not included in the calculation, the book value can not go below the salvage value. Following are the equations necessary to use the declining balance methods. R = Depreciation rate. For 1.25 Declining balance(1.25DB) method, R=1.25/N. For 1.50 Declining balance(1.25DB) method, R=1.50/N. For 1.75 Declining balance(1.25DB) method, R=1.75/N. For double Declining balance(DDB) method, R=2.00/N. The allowable depreciation Dm for any year m and any depreciation rate R is; Dm = RP(1-R)m-1 or Dm = (BVm-1)R The book value for any year m is : BVm = P(1-R)m or BVm= BVm-1 - Dm , provided that BVm > F Since the book value can never go below the estimated salvage value, the declining balance method must be forced to intersect the value of F at time N, this may be accomplished by switching from the declining balance method to either the SOY method or the SL method. For the same piece of equipment as in SL method example, calculate the allowable depreciation and the book value for each of the 5 years of its life. Solution : R= 2/5 = 0.4 Dm = 0.4(BVm-1) BVm = BVm-1 + Dm

Contd
Year 0 1 2 3 4 5 Dm, in $ 0 0.4 X 12,000 = 4,800 0.4 X 7,200 = 2,880 0.4 X 4,320 = 1,728 0.4 X 2,592 = 592 0 BVm, in $ 12,000 7,200 4,320 2,592 2,000 2,000

Note that in year 4, the calculated depreciation using the DDB method resulted in a book value lower than the estimated salvage value. Therefore, the allowable depreciation was only $592, which in effect was a straight-line depreciation taken in year 4. Then in year 5, since all the depreciation had already been taken, allowable depreciation would be equal to 0. The total ownership costs would be the sum of the investment costs and the depreciation costs. Graphical representation of The allowable depreciation for the SL method example piece of equipment using each of the three methods
12000 10000 P = $12000

8000 SL 6000 DDB 4000 F = $ 2,000 SOY

2000

Illustration for calculation of total ownership cost A piece of equipment costing $67,000 new, with a 7 year useful life and an expected salvage value of $7,000 is being considered for the purchase. Calculate the yearly ownership cost using straight line depreciation. Also calculate the hourly ownership costs assuming the piece of equipment will be utilized an average of 1400 hr. each year. Solution : The average investment value = (67000 X 8 + 7000 X 6 )/ 14 The annual depreciation amount = (67000-7000) / 7 = $8,571 The total annual ownership costs would be ; Interest = 0.12 X 41,286 = $ 4,954 Taxes, etc. = 0.08 X 41,286 = 3,302 Depreciation = 8,571 Total annual ownership costs = Interest + taxes + depreciation =$16,287 The hourly ownership cost = $16,287 / 1,400 = $12.02 per hour of use. Alternative method of calculating the cost of ownership Using Time value of Money : Knowing the cost and estimated salvage value of apiece of equipment, along with the interest rate to be used in the calculation, the equivalent uniform annual ownership cost can be determined Given the same equipment described in the case of SL method , calculate the yearly and hourly ownership. Solution : The equivalent uniform annual ownership cost is (for the previously discussed interest rate of 20 percent). A = $67000(A/P,20,&) - $7,000(A/F,20,7) = $18,045 The hourly cost would be = $18,045/1,400 = $12.89 per hour of use.

$7,000 I = 20% 0 7

$67,000
There is a significant difference in the costs calculated from the two methods. The alternate method will always yield a larger estimate of the ownership costs because it considers the Time value of money for all expenditures rather than using the average value times the interest rate. While the first method has been used for many years and, when interest rates were lower, gave reasonable estimates, today the alternate method normally will yield a more realistic estimate of the ownership costs. Of course it too is only an estimate, and the assumption that taxes, insurance, and storage costs will function in the same way as interest rates on borrowed capital may be somewhat conservative. OPERATING COST Construction equipments(with internal combustion engine) require Fuel And Lubricating oil. Fuel amount consumed & unit cost vary with equipment type, operating conditions & location. Equipment selection requires estimating the operating conditions. Two conditions prevail:a) Extent of full power operation. b) Actual operation duration in n hour or a day. Full engine power required while loading the dipper or climbing an embankment. Usually full power is required for short intervals & it will idle for rest duration. HORSE POWER RATING Manufacturers literature hp ratings determined in standard conditions. a)Pressure of 29.9 in of Hg. b)Temperature of 60o F. Specified power may be Bare engine power or Flywheel power with attached accessories. Accessories usually include a Fan, Generator, Fuel pump, Water pump, Air cleaner & Lubricating oil pump. Bare engine power = 1.25 x Flywheel power. Engine rated 200 fwhp may develop 250 ho bare engine power. FUEL CONSUMED Under standard conditions :a) Gasoline engine consumes 0.6 gallon of fuel per flywheel horse power hour. b) Diesel engine consumes 0.04 gallon of fuel per flywheel horse power hour. Horse power hour is a measure of work performed by engine. Work performance estimation requires : a) Average power generated by engine . b)Duration of this performance.

Engines seldom run at constant or rated output.Power shovel rated at 160 fwhp operates at maximum output for 5 sec in a cycle time of 20 sec & rest time at half of its rated output. Consider 10 min/hr idle time. Time factor = 50/60 = 0.833 Engine factor = [(5/20)x1] + [(15/20)x0.5x1] = 0.625 Operating factor = 0.833x 0.625 = 0.520 Fuel consumed per hr = 0.52 x 160 x 0.04 = 3.33 gal LUBRICATING OIL Quantity of lubricating oil used depends upon: Size of the engine Capacity of crankcase Condition of the piston rings Number of hours between oil change Common practice to change oil after every 100 to 200 hrs. Estimation of oil quantity required :q = hp x 0.6 x 0.006 lb per hp-hr + c 7.4 lb per gal t q = Quantity consumed, gph hp = rated horse power of engine c = crankcase capacity , gal t = number of hours between change ECONOMIC LIFE OF CONSTRUCTION EQUIPMENT Equipment owner is interested to obtain a) Lowest possible cost per unit of production. b) When equipment should be replaced. Determination of most economical time of replavemnt requires a) Accurate record of b) Maintenance c) Repair costs d) Downtime e) Ownership & operation costs The costs to be considered are :a) Depreciation and replacement cost b) Investment costs c) Maintenance and repairs cost d) Downtime cost e) Obsolescence Consider a) Initial equipment cots = $ 20,000 b) Number of hours used per year = 2,000 DEPRECIATION AND REPLACEMENT COST Replacement of equipment requires knowledge of salvage value and replacement cost of an equal machine. Average cost of equipment has been raising at the rate of 5 percent per year during past 10 years.

DEPRECIATION AND REPLACEMENT COST

End of year
0 1 2 3 4 5 6 7 8

Replacement cost
$ 20,000 21,000 22,000 23,000 24,000 25,000 26,000 27,000 28,000

Salvage value
$ 20,000 15,000 12,000 10,000 8,500 7,000 6,000 5,200 4,500

Loss on replacement
0 $ 6,000 10,000 13,000 15,500 18,000 20,000 21,800 23,500

Cumulative hours of use

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Cumltv. cost per hour

0 $ 3.00 2.50 2.17 1.94 1.80 1.67 1.56 1.47

INVESTMENT COSTS Table below gives cumulative cost per hour for an equipment. Investment is assumed to be 15 % of the equipment value. Owner should use an interest rate appropriate to his operations

INVESTMENT COSTS
Year Investment, start of year Depreciation Investment, end of year Investment cost Cumltv Investment cost Cumltv use, hr Cumltv. cost per hr

1 2 3 4 5 6 7 8

$ 20,000 15,000 12,000 10,000 8,500 7,000 6,000 5,200

$ 5,000 3,000 2,000 1,500 1,500 1,000 800 700

$ 15,000 12,000 10,000 8,500 7,000 6,000 5,200 4,500

$ 3,000 2,250 1,800 1,500 1,275 1,050 900 780

$ 3,000 5,250 7,050 8,550 9,825 10,875 11,775 12,555

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

$ 1.5 1.32 1.18 1.07 0.98 0.91 0.84 0.79

MAINTENANCE AND REPAIRS COST Table below gives maintenance and repairs cost for an equipment. These are dependent upon the conditions of equipment use

MAINTENANCE AND REPAIRS COST

Year Annual cost Cumulative cost
$ 800 2,500 4,750 7,490 10,850 14,720 19,460 24,940

Cumulative use, hr
2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Cumulative cost per hr

$ 0.44 0.63 0.79 0.94 1.09 1.23 1.39 1.56

1 2 3 4 5 6 7 8

$ 880 1,620 2,250 2,740 3,360 3,870 4,740 5,480

DOWNTIME COST Downtime is the time when the machine is not working because of some repair or adjustment. Downtime tends to increase with usage. Productivity is the ability of the equipment to produce at its original rate.

DOWNTIME COST
Year Downtime % Cost per hr Downtime cost, yr Cumltv down time cost Cumltv hrs Cumltv cost per hr Productivity factor Cumltv cost per hr

1 2 3 4 5 6 7 8

3 6 8 10 12 14 17 20

$ 0.18 0.36 0.48 0.60 0.72 0.84 1.02 1.20

$ 360 720 960 1,200 1,440 1,680 2,040 2,400

$ 360 1,080 2,040 3,240 4,680 6,360 8,400 10,800

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

$ 0.18 0.27 0.34 0.41 0.47 0.53 0.60 0.68

1.00 0.99 0.98 0.96 0.96 0.94 0.92 0.90

$ 0.18 0.27 0.35 0.42 0.49 0.56 0.65 0.76

Continuing improvements in the productive capacity of the equipment have resulted in lower cots of production. These improvements decrease the desirability of continuing with old equipment.

Loss of reduced production cost with the new equipment is termed as obsolescence cost

OBSOLESCENCE COST/HR FOR LIFE OF THE EQUIPMENT

Year Obsolescence factor Equipment cost per hr Obsolescence Cost per cost per hr yr Cumltv cost Cumulative Use hr Cost per hr

1 2 3 4 5 6 7 8

0 0.05 0.10 0.15 0.20 0.25 0.30 0.35

$ 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00

$0 0.30 0.60 0.90 1.20 1.50 1.80 2.10

$0 600 1,200 1,800 2,400 3,000 3,600 4,200

$0 600 1,800 3,600 6,000 9,000 12,600 16,800

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

$ 0.00 0.15 0.30 0.45 0.60 0.75 0.90 1.15

SUMMARY : CUMULATIVE COST PER HOUR

Item
Depreciation and replacement Investment Maintenance and repairs Downtime cost Subtotal Obsolescence Total

1
$ 3.00

2
$ 2.50

3
$ 2.17

4
$ 1.94

5
$ 1.80

6
$ 1.67

7
$ 1.56

8
$ 1.47

1.50 0.44 0.18 5.12 0.00 5.12

1.32 0.63 0.27 4.72 0.15 4.87

1.18 0.79 0.35 4.49 0.30 4.79

1.07 0.94 0.42 4.37 0.45 4.82

0.98 1.09 0.49 4.36 0.60 4.96

0.91 1.23 0.56 4.37 0.75 5.12

0.84 1.39 0.65 4.44 0.90 5.34

0.79 1.56 0.76 4.58 1.15 5.73

LOSSES RESULTING FROM IMPROPER EQUIPMENT REPLACEMENT (excluding obsolescence losses )

Replaced Cumulative Cumulative Minimum cost per cost per at End of hours year hour hour
1 2 3 4 5 6 7 8 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 $ 5.12 4.72 4.49 4.37 4.36 4.37 4.44 4.58 $ 4.36 4.36 4.36 4.36 4.36 4.36 4.36 4.36

Extra cost per hour

0.76 0.36 0.13 0.01 0.00 0.01 0.08 0.22

Total loss

$ 1,520 1,440 780 80 0 120 1,120 3,520

LOSSES RESULTING FROM IMPROPER EQUIPMENT REPLACEMENT (including obsolescence losses )

Replaced Cumulative Cumulative Minimum at End of hours cost per cost per year hour hour
1 2 3 4 5 6 7 8 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 $ 5.12 4.87 4.79 4.82 4.96 5.12 5.34 5.73 $ 4.36 4.79 4.79 4.79 4.79 4.79 4.79 4.79

Extra cost per hour

0.33 0.08 0 0.03 0.17 0.33 0.55 0.94

Total loss

$ 660 320 0 240 1,700 3,960 7,700 1,5040

ECONOMIC LIFE OF EQUIPMENT THAT SERVES OTHER EQUIPMENT If machine works alone the economic life can be determined from above tables. If machine works along with other equipments the delay in production because of one machine idles the other machines. The cost of the idle machines is charged to the one causing the delay. This is done by increasing the cost of production of the machine causing delay.

One method of alleviating the increasing cost per unit of production is by replacing the older machine by new one with higher availability factor. Another method of alleviating the increasing cost per unit of production is by maintaining higher availability factor by adopting good maintenance program and replacing worn out parts prior to failure.

DOWNTIME COST CONSIDERING THE COST OF TIME LOST BY SERVICED EQUIPMENT (working 2000 hrs/yr)
Year Down-time % Cost per hr Downtime cost per yr Cumulative Hours

Downtime cost

Cost per hr

1 2 3 4 5 6 7 8

3 6 8 10 12 14 17 20

$ 1.68 3.36 4.48 5.60 6.72 7.84 9.52 11.20

$3,360 6,720 8,960 11,200 13,400 15,680 19,040 22,400

$ 3,360 10,080 19,040 30,240 43,680 59,360 78,400 100,800

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

$ 1.68 2.52 3.17 3.78 4.37 4.93 5.60 6.30

SOURCES OF CONSTRUCTION EQUIPMENTS There are at least three methods by which the contractor can secure the equipment: a) Purchase it b) Rent it c) Rent it with an option to purchase it at a later date. Advantages of owing the equipment :a. More economical if the equipment is used sufficiently. b. More likely to be available for use when needed. c. Owner ship ensures better maintenance and care, so purchased equipment should be kept in better mechanical condition. Disadvantages of owing the equipment :a. May be more expensive than renting b. Purchase requires substantial investment. c. Ownership may influence the owner to continue using obsolete equipment. d. Ownership may influence the owner to continue doing same type of work. e. Ownership may influence the owner to continue using the equipment beyond its economic life.