Abstract The most important production problem confronting the average manufacturer today is whether or not to scrap old machinery or equipment and buy more modern machinery of higher efficiency. While all the factors involved cannot be evaluated by an exact computation in dollars and cents and the final answer must necessarily. involve the element of judgment, nevertheless the answer will in most cases be no better than a guess unless those factors which can be measured exactly in dollars and cents have been correctly reduced to figures. Some of the printed discussions of this problem have included as one of the determining factors the present "book value" of the machinery to be scrapped. If one stops to think, it is evident that any such solution must be in error. Whether or not we have charged more than adequate or less than adequate depredation in the past has nothing to do with the case. Another factor which is frequently overlooked is the effect of compound interest. As the period increases its importance increases.
Charles H. Porter (Sat,) studied this question.