Methods and software for simulation of optimal renewal of capital assets

This article surveys recent developments in the optimal renovation of capital assets and introduces new asset replacement algorithms under limited forecast about changing uncertain costs. The costs include operating costs of the current asset in use and the replacement cost (price of new assets). The evolution of those costs depends on external technological, economic, and environmental factors. The open innovation increases the importance and complexity of technological change. We study new modifications of the classic Economic Life replacement method for uncertain costs. The analyzed algorithms work well for arbitrary age-distribution of deterministic or stochastic operating cost. We demonstrate their superior performance in various scenarios of improving technology reflected in decreasing operating and new asset costs. Numeric experiments are provided, and managerial implications of the obtained outcomes are discussed.