Abstract
ABSTRACT This paper studies the classical problem of evaluating end effects when the study period is shorter than the asset's economic life. By relating the concept of imputed salvage value to classical micro-economic theory, we make three contributions. First, we generalize the concept of imputed salvage value, normally defined only for assets whose maintenance and operation costs arc independent of age, to include assets with arbitrary operating and maintenance costs. Second, we show that generalized imputed salvage values are equivalent to the stationary dual prices of an infinite-horizon linear program, thereby providing explicit computational formulae. Third, we argue that imputed salvage values (not market salvage values) correctly measure economic value and, hence, appropriately evaluate end effects.
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